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Dividing a business in a Michigan divorce

On Behalf of | Feb 24, 2017 | high asset divorce |

Dividing property in a divorce can be complicated and contentious even when complex assets are not involved. However, divorcing spouses who own a business often face even more questions when it comes to how to properly divide property in divorce. Here are some things to keep in mind when it comes for how to proceed:

Is the business separate or marital property?

Business valuation – where the true value of a business is determined – will happen. However, before valuation even begins, it must be determined whether the business is separate or marital property. Three important questions that affect this categorization are:

1. Was the business acquired during the marriage?

2. Where did the funds to open the business come from?

3. How did each spouse contribute to the business?

It should be emphasized that simply because a business was acquired before the marriage it does not automatically categorize it as separate property. For example, a spouse may invest marital funds into the business that result in an increase in income. In this case, since marital funds were used, the other spouse may be entitled to receive value from it.

Finding the true value of the business

Finding the true value of a business can be a rather complicated process. Unlike a car or other tangible asset, one cannot just look at a business and put a price tag on it. Rather, finding the true value involves working with real estate appraisers, forensic accountants and other specialists to determine what the actual value is. This has to happen before deciding what the possible division should even look like.

What will be the future of the business?

The future of the business is entirely dependent on the individual circumstances of the couple and the way the business was set up and runs. Some possible scenarios include:

· The spouses operate separate aspects of the business.

· One spouse buys the business out and makes payments to the other spouse for compensation.

· Both spouses remain business partners after divorce and continue working together.

If looking at these possible scenarios you find yourself already starting to worry, try not to panic. Now is not the time to overly worry about what will happen. Rather, now is the time to prepare and work with an attorney who is experienced handling divorce for business owners. This attorney will be able to find the true value of the business and will also be able to make recommendations with your best interests in mind.