Splitting Up A Business

Sometimes, it is necessary to divide the assets of a family business when two parties are getting a divorce. If a husband and a wife are co-owners of a business, it is probably impossible for them to continue to run the business together after their divorce. It probably will make sense for them to go their separate ways—dividing the assets of the business at the time that their divorce becomes final.

Often, the best approach is for one party to keep the business and to “buy out” the other party, or to give the other party some other asset in exchange.

Usually, only one spouse runs the business or works in the business. However, this does not mean that both spouses do not have a financial interest in the business. Regardless of who works in the business, both spouses may have a claim to the assets, inventory, stock, and other value in the business. Placing a specific financial value on a business, or on a spouse’s share of the business is very technical. Ordinarily, an accredited business evaluator, certified public accountant, or other financial specialist is engaged as an expert witness to determine the value of the business. Such an expert explores not only the value of the business property, equipment, assets, and so forth, but also the value of the business name, client list, and other goodwill.

The process of setting the value can become quite technical, involving the application of discount rates, premium rates, capitalization rates, and other financial formulas. The process is made even more difficult when there are other owners of the business besides the husband and wife involved in the divorce case. One should never attempt to divide a business or its assets as part of a matrimonial proceeding without the assistance of an attorney and/or a financial expert.