Divorce for Business Owners

The fair market value of a business can have significant implications in a divorce and is very often a hotly contested issue. The divorce attorney must be familiar with both the rules involved in such valuations as well as the relatively small number of experts working in the area who can provide valuation opinions. Placing a value on a small ice cream shop 100% owned by the wife, for example, is very different than valuing the interest of a 10% partner in a large insurance agency. Different rules and discounts apply to each situation, and some experts are much more qualified than others to be involved in each case.

Knowledge, experience and having the right expert are all essential to a fair outcome. Working with a professional business evaluator, Enos Family Law helps clients to determine business values and works hard to help them try to reach agreements on their community property division. Click here for a more detailed discussion of Business Valuation in a Texas Divorce.

If John owns a small machine shop involved in a divorce, for example, once a value is placed on his business the real negotiations begin. In this example, there is usually no question that John keeps the business (unless an agreement is made to sell the company), but the value of his business must be balanced against other assets awarded to his wife or some portion of the value paid over time in payments to the wife.

Many small business owners pay personal, household expenses directly from the business accounts. This practice can affect the valuation of the business and increase what the business owner’s real income is and thus change child support calculations. A business owner who works many long hours (as is often the case), may be at a disadvantage in a child custody case simply because of those work hours. On the other hand, a business owner who is usually in control of their own schedule may be more flexible when it comes to spending time with the children. Overdue taxes can be an issue in some divorces involving small businesses, and the help of accountants or tax attorneys may be needed to assist the divorce attorney.

Representation of the spouse of a business owner typically involves more work because the other spouse often has control of information and financial data. Often, a payout plan is negotiated to provide income and compensate the other spouse for the community’s interest in the business. Things can get very tricky when both spouses work in the business, and sometimes one spouse must be ordered to leave the business while the divorce is pending.