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Valuation and division of business interests during divorce

On Behalf of | Aug 17, 2023 | Divorce

Divorce is not just about emotions; it is also about sorting out practical matters. One tricky issue is dividing business interests. The big question is: Is the business part of what you both built together or something separate? Things get even trickier when the business grew during the marriage. How do you divide business interests if that is the case?

Valuation of business interests

When your business is in the divorce mix, figuring out its value can be complicated. Factors to consider include:

  • Market value: Think about how much your business would sell for right now.
  • Income approach: Estimate your future income and convert it into today’s money.
  • Asset check: Add up everything your business owns and subtract what it owes to find the total value.

You will need a list of all your business stuff – like things you own, money in the bank and even your business reputation. This job might feel overwhelming, but bringing in a business expert can help. The value of your business affects other divorce decisions, too, like support payments.

Once you have determined the value, negotiations can begin about how to divide the business.

Methods of division

There are several ways to manage business interests during divorce:

  • Sale of the business: A practical and less complicated option is to sell the business and share the money fairly. This choice facilitates a definitive separation, so each of you can follow your own path.
  • Buyout agreement: One of you may assume ownership by buying out the other’s share. This avenue offers a direct transition, so there will only be a singular custodian of the business entity.
  • Continued co-ownership: If the business still brings in important income for both of you, keeping it as co-owners could be a smart move. But this choice requires continuous communication and a well-made business plan to keep the success train rolling.

Making decisions and moving forward

When business and divorce mix, open communication is necessary. You may consider mediation to give both of you a chance to share your thoughts and find a fair resolution. Consulting with a lawyer can also help you find your way through the division of business interests and the entire divorce process.

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