Getting a divorce is both physically and emotionally exhausting. The process gets even more complicated when dividing shared assets, your business in particular. Not every couple ends up like the Amazon’s founder and CEO Jeff Bezos and ex-wife McKenzie who finalized their divorce without fuss.
How can co-owner couples divide their business without the drama? Hiring arbitration and mediation services helps you understand your options and how you can make the process as smooth as possible.
Determine Your Rights in the Business
Valuing and dividing a business is not the same as with other types of property, like bank accounts. So, if you and your spouse are calling it quits, determine whether the business involved is a marital asset or separate property. This will help you divide the business fairly.
Marital property refers to anything either of you earned or acquired during your marriage. Separate property, on the other hand, is things owned by only one of you. A property you or your spouse have acquired before marriage, for example, is separate property.
States have different laws when it comes to dividing assets. Colorado, for example, follows “equitable distribution” rather than “community property.” Marital property in the state is divided in an equitable manner, which means the spouse with higher earnings usually receives a bigger percentage of the property upon divorce.
Dividing the Business Fairly
Once you have identified whether your business is marital or separate, you’ll have to value your business. This stage is where things get messy, and it is a major source of disagreements between divorcing couples. You and your spouse can individually hire a valuation professional to conduct the review.
- Certified Business Appraiser (CBA)
- Accredited Senior Appraiser (ASA)
- Certified Public Accountant (CPA) designated in Accredited in Business Valuation (ABV)
Any of these experts can help determine the appropriate fair market value of the business interest. In some cases, a judge has to decide which expert has a more credible valuation. This could consume more time and money than simply coming to a settlement.
When the value of the business interest has been determined, you can address the business interests during divorce with three options, namely:
- Buying out the other spouse – this is a method where one of you has to buy by the other’s interest in the business.
- Selling the business – if the first option is not a viable solution, you can sell your business and divide the proceeds. Selling a business would not be easy, depending on marketability, profitability, and economic conditions.
- Remaining co-owners – this option allows you to co-own the business even after the divorce. If you use this approach, you have to decide who will be responsible for running the business.
Other factors can make the process more complicated. You need to work with divorce professionals to streamline the settlement process.
Filling Settlements in Private
You and your spouse can divide the business without going to court unless the case requires an intervention of a judge. Working with mediation attorneys help you keep your family affairs private. They will also help you and your spouse communicate and explore your options to come up with a favorable settlement.
Filing for a divorce is a tough personal decision to make for business owners. Your approach shouldn’t affect the good of everyone in the company like how the Bezoses handled the situation. Take time to discuss the matter with your spouse and weight your options carefully. This isn’t only about your shares in the company, but also the livelihood of your employees.