A business or professional practice is a valuable asset. It is also a key source of revenue. Professionals and business owners can earn a living wage by becoming their own bosses. Those who have committed years of their lives to creating, improving or running an organization likely also derive a sense of purpose and self from their professional undertakings.
As such, the idea of losing the business can feel like a nightmare scenario. Business owners and successful professionals preparing for divorce may worry about what might happen to the company they run when they divide their property. There are a few strategies that business owners can employ to protect their organizations.
1. Negotiate an amicable settlement
The easiest way to ensure the best property division outcome is to retain control of that process. Spouses don’t need to litigate and ask a judge to apply community property statutes to their assets. They have the option of working cooperatively with one another instead. Business owners who agree to compromises in other aspects of the property division process can likely retain sole ownership of the company after a divorce.
2. Prioritize an accurate valuation
If property division litigation is necessary or spouses anticipate lengthy negotiations, they need to have a credible value set for the business throughout that process. Business valuation involves looking at details ranging from the goodwill of the local community to the value of equipment and machinery. Choosing the right valuation method and looking at the big picture can help people minimize how much equity they lose. A proper valuation helps ensure a fair outcome when the marital estate includes a business or professional practice.
3. Avoid the double dip
Business owners need to be careful to ensure that they don’t use that same income twice in the financial negotiations of their divorce. It is somewhat common for spouses to reference the value of the business during community property division negotiations. They might then reference it again when requesting alimony or spousal maintenance. Ensuring that the future income of the business only factors into financial discussions in one way protects business owners from unfair losses during financial negotiations.
Having support during the business valuation process, property division negotiations and even litigation can make a major difference for successful professionals and business owners. Those who want to preserve their interest in a company often need to strategize carefully as early as possible in the divorce process.