Some divorces are relatively simple – and some aren’t. If you are a small family business owner, you may have some legitimate concerns about exactly how difficult your breakup is going to be for the business.
That makes it particularly important to consider your first steps (and every step you take after that one) very carefully. Here’s where to start:
1. Understand what protections you do and do not have.
Did you own the business before you got married? If so, you may have had the foresight to get a prenuptial agreement that clarifies exactly how things are to be valued and divided. If you started the business after your marriage, you may have a postnup that does the same thing.
This is not the time to rely on your memory, however. Get any agreements you may have with your spouse out and read them.
Even without a prenup or a postnup, however, you may not be at risk of losing the business. New Jersey is an equitable distribution state, which means that marital assets and debts can be divided in any way that seems fair and reasonable to both parties (and/or the court). If you and your spouse are both willing to negotiate responsibly and fairly, you can save a lot of trouble and money – as well as your business.
2. Determine the value of your business.
If you hope to keep your business after your divorce (instead of selling it), you are probably going to have to either offer your spouse something of value in exchange or buy out their share – but you can’t do that until you have an idea of the dollar figures involved.
Determining a fair valuation for the business isn’t always easy. Some options include:
- ● Income valuation: This involves looking at the company’s track record of earnings and projecting into the future.
- ● Asset valuation: Some businesses have very few physical assets, while others may own trucks, property, equipment and inventory that must be calculated.
- ● Market valuation: How much would your company be likely to fetch if you did have to sell it today?
Coming to an agreement about how the business should be appraised for its value (and who gets hired to do it) may be the hardest part of the divorce.
Whatever your situation, learn more about your legal options today to best protect your company and your future.