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3 Issues that add complexity to business owner divorce

If you are a business owner, you probably drew up a contract when you formed the company. Decisions about the structure of the business and what to do if one partner later wanted out were important initial considerations.

But did you consider how the end of marriage might impact the business and the day-to-day operations? A spouse or partner can play a crucial role in the success of a business. Often opposites attract and one spouse may bring in the clients while the other provides the services. Or one spouse may handle the children's schedule and balance the books in the evening.

Why do these divorces become more complicated? We discuss three potential issues that underscore the need to seek sound legal counsel.

Business valuation

The New York Times recently detailed one of these scenarios. The wife made connections throughout the community to help her husband build the insurance firm. Her name was not on the business and her role was never clearly defined.

While their divorce is pending joint assets cannot be touched. She did not have access to the cash flow from the business.

Tied in with these issues is getting the valuation correct to ensure a fair property division. Creative solutions are often necessary to keep the business running while providing the necessities for the other spouse.

Identifying nonmarital interests

Nonmarital refers to property that is not divided. Several general categories include, but are not limited to:

  • Property owned prior to the marriage
  • An inheritance or gift to one spouse during the marriage
  • Property acquired by one spouse after the valuation date

These determinations can become tricky especially when assets are comingled over the years. Tracing can sometimes break out the portion that was nonmarital and even build in appreciation tied to this property.

No clear winner or loser

Unlike other types of business lawsuits, rarely is there any bright line that separates the winner from the loser. You may be a savvy dealmaker in the business realm, but you cannot walk away from the table when it is the mother or father of your children. When negotiations and mediations break down, the matter may end up in front of a judge. Then, you cede control. Very rarely is anyone happy with what the judge decides.

In addition, the process can take longer than other contract negotiations.

You need to work with an attorney you can trust. At Burns & Hansen, P.A. we can help you see the broad picture and make informed decisions that are not solely controlled by emotion.

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