In the business world, leaders often focus on market trends, while the impact of divorce is frequently overlooked. However, divorce can have a significant impact on a business or professional practice. Beyond personal issues, it can introduce a variety of business challenges. In this article, we’ll discuss the effects of divorce on businesses and provide guidance on managing these challenges to protect professional interests.
Business and Divorce: Protecting Your Assets and Plans
Divorce can shake the foundation of any business. For owners, dividing assets is critical because it affects both the present and future of the company. Splitting business assets in a divorce is complex and requires a detailed look at financial records, current profitability, and potential growth. Financial experts are often needed for a clear business evaluation.
As family law attorneys, we can advise on protecting assets you might not immediately recognize as valuable. While many focus on tangible assets like real estate or equipment, intangible business assets such as patents, trademarks, and customer lists are often overlooked.
Planning for Your Business in Case of Divorce
When navigating divorce proceedings, unforeseen challenges can arise that directly impact your business. At Garretson & Holcomb, LLC, we understand the intricacies of both family and business law, especially in our cities of West Chester, Mason, and Hamilton, Ohio.
To safeguard your business interests, it’s important to have a business continuity plan that takes into account the possibility of a divorce. This approach is similar to having a prenuptial agreement for personal assets. Without a business continuity plan, business owners might find themselves in situations where:
- They have to purchase their spouse’s share of the business.
- They have to think about co-owning the business with their former spouse.
- They must consider dividing the business in two.
In cases where an agreement is hard to reach, spouses may consider selling the business and splitting the proceeds. This can sometimes result in a hurried sale, however. Which may require a sales price below market value.
Simple Steps to Shield Your Business in a Divorce
Here’s how you can protect your business if you’re facing a divorce:
- Keep Finances Clear: Ensure business and personal finances are separate. It simplifies things.
- Pay Yourself Fairly: Draw a regular, market-based salary. This way, you’re clearly valuing your work separate from the business’s overall success.
- Think About Trade-offs: Sometimes, you might need to give up other assets in the divorce negotiations to maintain control of your business.
- Know Your Business’s Worth: Ensure an accurate evaluation of your business is done. It helps keep negotiations fair.
- Consider Prenups or Postnups: These documents can outline how the business is treated in the event of a divorce.
- Think About a Trust: By placing your business in a trust, it can be viewed as separate from marital assets. Ask our experienced business law attorneys for more information.
Remember, the goal is to ensure your business remains stable during personal life changes. Utilizing these strategies can help you meet that goal.
Marital vs. Separate Property in Ohio
Generally, during a divorce, only marital assets need to be divided. Separate property isn’t typically split in Ohio unless there are unique circumstances. Most assets and debts gained during the marriage are seen as marital property. This means everything from real estate and personal property to stocks and retirement plans. Even if you started the business before the marriage, a portion of the business may be a marital asset in certain circumstances.
Why Valuation Matters in Divorce
When a business is part of marital assets, an evaluation helps ensure a fair asset split. Though some may see this as a lengthy and costly process, with the proper guidance, valuations can be both efficient and accurate.
How Businesses are Valued
Determining the accurate value of a business during divorce proceedings is essential. Here’s a quick look at how businesses are typically valued:
- Asset Approach: This method looks at what the business owns (assets) minus what it owes (liabilities).
- Tangible Assets: Physical things like equipment and property.
- Intangible Assets: Non-physical items like patents and customer lists.
- Market Approach: Compares the business to similar ones that have sold recently.
- Income Approach: Uses past data to predict future profits.
Usually, a combination of these approaches offers the most accurate valuation. Our attorneys are experienced in analyzing this data and suggesting the best distribution methods.
Get Help: Garretson & Holcomb, LLC
Understanding the overlap between divorce and business can be challenging. At Garretson & Holcomb, LLC, we provide clear guidance in both family law and business matters. We aim to simplify the process and ensure your business remains stable even when personal situations change. For trusted advice and practical solutions, reach out to our experienced team at (513) 863-6600. We’re here to help.