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What happens to your business in a divorce?

On Behalf of | Jun 30, 2020 | Divorce |

Whether you have spent years building your business or you have founded a startup that has a great deal of future potential, protecting the health of your business is key to its continued success. During a divorce, though, it can be challenging to protect that business. If the court considers your business a part of your marital property, what will happen to that business in a divorce?

What are your options if your business is subject to property division?

The American Bar Association states that business owners usually have three options during property division: sell the business, buy out your spouse or continue to operate the business together. Each of these options has unique challenges associated with it.

Buying out your spouse’s share of a business allows you to move forward as its sole owner. However, it also involves sacrificing significant funds or other high-value assets in exchange.

Selling your business can be difficult for owners who have spent years building their work. Selling your business can also take months to finalize. However, it may be the best option if you do not have the assets to buy out your spouse.

Continuing business together can be one of the most challenging options because it requires you to put your business ahead of your personal feelings.

How much is your business worth?

Whether you choose to sell your business or to buy out your spouse’s share, establishing a fair value for your business is a challenging but necessary step of property division. Generally, three different valuation methods are available to you:

  • Asset-based approach—Using an asset-based approach determines a business’s value based on the value of its assets and the impact of its debts.
  • Income-based approach—An income-based approach uses the current and projected profits of the business to determine the value of your business.
  • Market-based approach—By comparing your business to similar businesses that have sold in the past few years, you can estimate what your business could sell for. This requires many similar businesses to compare to.

If you are concerned about the fate of your business, speak to a divorce attorney with experience in complex property division. They can help you navigate these challenges and protect your business’s future success.