When one or both parties in a divorce are self-employed or own a small- or medium-sized business, that fact presents challenges for both parties and their lawyers. In most cases, only one spouse is actively involved in the small business. As a result, the other spouse may be anxious about the financial impact of the divorce and their own financial security. When considered for purposes of determining support, the business income is almost always disputed by the parties.
Common Concerns for Small Business Owners
The most common concerns for divorcing spouses where a small business is involved are:
- Will the business income be fairly determined?
- Will the business be sold as a result of the divorce?
- What happens to the business debt?
A business-valuation expert can be used to place a value on the business, but the price tag of this service can be high. Still, it may be better to have a neutral third-party determine the value, especially for a smaller business where spending a lot of money to get multiple valuations is not money well spent.
Small Business Owners and California Law
No matter whether the business is one that can be readily sold or not, California law indicates that the business may still have a value that is assigned to the spouse to retains the business, despite what it may have as far as market value.
Whether we are trying to establish support or determine the value of the business, it is necessary to have an accurate understanding of the business’ income. This involves:
- An understanding of how income is generated through the business
- What qualifies as business expenses
- Where the hidden perks of the business can be found
Our clients appreciate that experienced advisors who can fully understand and explain the nature of the business valuation and assist clients in making reasonable decisions about the business valuation make the process easier.
How We Help Small Business Owners Facing Divorce
A clear and accurate disclosure of the business’ true income is critical and we recognize the importance of this for both parties. Knowing where the “red flags” are is crucial for a quick and efficient resolution to the questions concerning the business.
No matter how smoothly the valuation and legal proceedings go, the business pays a price tag on the distraction resulting from a divorce. When the parties cannot agree on a valuation, it’s important to remember that the business can be split, if necessary. A business with two parties at war over it is not likely to last long.