Many small business owners who want to divorce panic at the thought of their spouse walking away with half of the business they built.
Before panicking, you should speak with an attorney.
Depending on the type of business, when it was started, the value of the business on the date of marriage, and a number of other factors, you may or may not have to buy out your spouse’s interest in the business.
The first thing an attorney may tell you to do is to hire a forensic accountant or an appraiser who can put a value on the business, and who can help analyze specific assets of the business and the cash flow.
The accountant or appraiser can help determine, if the business was acquired before marriage, how much the business appreciated during marriage, among other things.
Typically, if the business was acquired during the marriage with joint marital funds, it will be considered marital property, and will be shared between the spouses.
If it was acquired before marriage, or was purchased with separate funds, it is considered the separate property of one of the spouses.
However, even if the business was acquired prior to marriage or it was purchased with separate property, one of the spouses may still have a claim on the business if marital funds were used later in the business, or if the other spouse put a lot of work into the business.
Dividing businesses in a divorce can be complex.
Besides determining whether the business is marital property or separate property, it must be valued.
There are a number of different ways to determine how much a business is worth, including looking at income, looking at assets minus liabilities, and considering at similar businesses that have been sold.
The bottom line is that if you are getting divorced and own a business, you need to speak with an attorney.