Many spouses open and run businesses together during their marriage. When that marriage ends, the individuals must figure out what to do with their company—close it or continue working together? Many spouses choose a third option: having one person buy out the other. If it is a corporation or LLC, this may include purchasing shares. If it is a partnership, the business will need to be valued.
Additionally, business assets can be considered marital property regardless of ownership. In both situations, business evaluations are crucial parts of high net worth divorces.
Check the Shareholder Agreement
If one spouse wants to buy out the other spouse’s shares in a business, and if the spouses were part of a shareholder agreement, this contract may dictate the valuation formula used to determine the share’s price. For instance, the agreement may call for the net book value or the adjusted net book value, which differ in regard to including goodwill and other intangible assets.
If the agreement calls for the fair market value of the shares, or it there is no valuation clause or agreement at all, then the spouses may disagree on the price for these shares. In this situation, it may be up to the divorce court to determine the value of the business and the shares to be sold.
Business Assets as Marital Property
Both spouses do not have to be part of a business for it to affect their divorce. One spouse’s business may be included in the marital estate, even if the other spouse was never involved in the day-to-day running or finances of the company.
In this situation, business assets are generally valued at the fair market value. How an appraiser comes to the fair market value of a business can vary. It may be easiest if both parties agree to a specific formula, otherwise each may need to pay for separate valuations.
A prenuptial agreement also may dictate how business assets should be handled during a divorce.
Hire a Reputable Valuation Firm
The business evaluation needs to be performed by a reputable company. This is incredibly important when spouses disagree on the value of a business or would prefer the business be valued at a higher or lower amount. While each spouse has the right to obtain his or her own business valuation, it is often beneficial and more cost effective to hire a neutral appraiser.
However, a neutral appraisal is not always the right way to go. If you are concerned about the accounting for the business, such as whether your spouse is hiding assets, it may be necessary to pay for a forensic accounting of the business.
It is best to speak with your attorney if you are worried about the business’s books.
Contact a Naperville Divorce Lawyer
Whether you and your spouse owned a small mom-and-pop business downtown or a large corporation that sold goods worldwide, you need an attorney experienced with business evaluations in regard to divorce. The compassionate DuPage County family law attorneys at our office understand the complications that can arise with family businesses during divorce and will help you navigate the situation as smoothly as possible. Contact us today at 630-665-7676 or online to schedule an appointment.