You have a major task on your hands if you have to divide a business in your divorce. The following are some useful measures to help you with the division.
Categorize the Business Properly
Colorado is an equitable division state, which means Colorado courts don’t necessarily divide marital assets equally. Rather, the courts divide marital assets in a fair manner and take into account various factors, such the value of your separate assets, how much debt you have, and the length of your marriage.
Therefore, ensure that the court categorizes your business properly. For example, your partner might try to categorize the business you inherited from your grandparents as a marital property. You have to prove that the business is a separate asset and you didn’t commingle it with marital assets. Otherwise, you may share your separate asset (the business) with your spouse. Additionally, any increase in the value of any separate assets are marital and the court can order that your spouse receive a share in the increase in value of the separate asset.
Retain a Business Valuation Expert
Whether the business is a separate or marital asset, you need to know its accurate value because the value will influence asset division. For example, if the business is a separate asset and you overvalue it, the court will reduce your share of the marital assets to enforce equitable distribution laws.
Therefore, retain a business valuation expert to give you the true worth of the business. The expert will consider various aspects of the business, such as assets, debts, and growth prospects, to arrive at the true value of the business. In fact, both you and your soon-to-be ex-spouse may want to have your own business valuation expert to eliminate bias (perceived or real).
Enforce Relevant Agreements
Some people protect their businesses from divorce long before the threat of divorce looms. For example, you can use a prenuptial agreement to specify that any of the assets you bring to the marriage will remain your separate property upon a divorce. A prenuptial agreement could include the increase in value of any separate asset will remain your separate property upon a divorce.
Your partner may seek to overturn such agreements during your divorce, and you have to be alert to stop them. For example, you may have to prove that the prenuptial agreement is valid to protect it from your spouse. Don’t forget to hire a lawyer to help you block such challenges since they tend to be pretty complicated.
Sell and Divide the Proceeds
If the business is a marital property, then you have to divide it with your spouse. One way to divide the business is to sell it and divide the proceeds in the appropriate ratio. For example, if the court awards 40% of the business to your spouse, you have to award 40% of the sales proceeds to your spouse.
The sell-and-divide approach may appear simple, but it does have its complications. For example, the business may take a long time to sell or you might fail to get a fair market value price. Again, involve lawyers and business experts to help you overcome such challenges.
Buy Out Your Spouse
You may be in a situation where you don’t want to sell the business. Maybe you have a family business that has been in your family for generations and you don’t want to lose it. In such a case, you may buy your spouse’s share of the business so that you retain full ownership.
For example, if the business is worth $1,000,000, and your spouse is entitled to 40% of the business, you can give your spouse $400,000 and keep the whole business. Another option, you can even give your spouse a share of your marital assets worth that much so that you get to keep the business.
At the Law Office of Greg Quimby, P.C., we understand that many couples find business division a complicated and tedious job during a divorce. Fortunately, we have experienced attorneys that can help you out with the whole process. Consult us today and we will help you divide your business in a fair and accurate manner.