Both getting a divorce and business ownership can complicated endeavors, but when they are combined it can be a markedly complex situation. A business is considered an asset and therefore may be communal martial property, whether or not the spouse is actually the legal owner. In some instances, an ex-spouse of a business owner will be entitled to 50% of the business despite not exerting anywhere near the amount of time and energy. Therefore, it is important to understand the options available to business owners getting a divorce.
In Massachusetts especially, the stipulations around business appraisal for divorce purposes are frequently changing-therefore, hiring a professional business valuator is imperative in order to stay congruent with the law. In order for the questions of ownership to be sorted out in a legal and fair manner, the business will need to be evaluated and brought to court.
A handful of varying options exist for balancing getting a divorce and business ownership. If both parties share equal ownership, then they have the choice between continuing to manage the business together, selling it and dividing the profits, or one spouse can buy out the other in order to become the sole proprietor.
If only one spouse was involved with managing the business, then it is less likely that the business will be split equally between both persons. However, there are a few factors that may contribute to the non-owner spouse having rights to this particular asset. This includes living in a community property state, as well as the question of whether joint funds were utilized for the financing of the business. In these cases, the non-owner may still be entitled to a portion of the business under divorce law.
When dealing with the complexity of getting a divorce and business ownership, it is necessary to have the business appraised in order to determine its worth within marital assets. A professional valuator will be able to present the court with official documents outlining the company's value. In a contested divorce proceeding, both sides will often employ their own business valuator, and each will present their findings and their evaluation of the situation.
Depending on whether or not the business owner plans to sell the business after the divorce, it will determine the type of valuation methods that the appraiser will exercise. If the business is not intended for sale, then most business appraisers will opine on the company's Fair Value because of the Mass. SJC's ruling in the Bernier v. Bernier case. The business's marketability and liquidation value will most likely not be examined using this model. Issues of tax affecting the business value also arise when using the Fair Value metric. On the other hand, a Fair Market Value approach will be useful in presenting the case to the court if there is a stipulation that the business will be sold. The valuator will be able to determine which method is most appropriate.
It is important to choose a business valuator that will be recognized by the court. The professional business appraiser should adhere to the Uniform Standards of Professional Appraisal Practice as promulgated by the Appraisal Institute of Washington, DC and be current on all new changes.
The case is more likely to be settled in your favor if you utilize a credible appraiser. At George & Company, we possess the business valuation and appraisal experience, credentials and knowledge to represent your needs in court. We will provide you with a comprehensive report of the factors leading up to the valuation number. A business valuation can also help identify other issues that must be addressed, such as expert testimony services or litigation support. Contact us today to learn more.