Many couples who own businesses seek legal advice when divorce is on the cards. Establishing business ownership and rights can be challenging, especially when it’s classed as joint marital property.
Since there can be a lot to work through with the average divorcing couple, you might like to start with some of the most critical information first. Here are a few of the most pressing details to explain to your new pre-divorce clients.
There Are Many Ways to Determine a Business’s Value
When your clients visit you to discuss divorcing with a business, it’s vital to help them understand that there is more than one way to determine its value. Instead, there are four: tangible property, intangible property, assets, and liabilities.
A qualified appraiser will value the business’s total inventory, including stock, machinery, company-owned buildings, and office equipment. Liabilities also form part of the calculations, such as credit lines, building rent, and equipment leases. Intangible assets refer to things of non-monetary value that are of critical importance to a business, like customers, potential customers, and reputation.
Distribution Can Differ From State to State
It’s easy to assume both parties will take a 50/50 share of the business in a divorce, but that’s not always the case. Many states, such as New Jersey and Pennsylvania, use equitable distribution, which means marital property is split fairly. This doesn’t always mean it’s divided equally.
Often, courts will consider each spouse’s role in the business and how they contribute to their family and home. However, in other states, like Texas and Washington, a business is split 50/50 if it was started during the marriage. If it was started before marriage, your law firm might tell your client that individual contributions potentially influence how much of the business they each receive.
Courts Can Consider Many Factors
While marital property, like homes and cars, can be easily divided evenly, the courts can consider many factors when determining a business’s value and subsequent sum for each spouse.
They might look at whether the business existed before marriage, how involved each spouse was in its daily operations, and the value they bring, like qualifications and experience. If there is evidence of one spouse borrowing from their family funds to buy something for the business, this might also be taken into account.
There is even potential for courts to decide whether one partner has the means to buy the other out and the arrangement they have for dividing their assets and liabilities. Finally, they might consider how capable each spouse is of earning a similar wage outside their business.
What You Can Do For Your Clients
Divorcing couples seek legal advice to ensure both parties are treated as fairly as possible. They also want to be confident that you have their best interests at heart. Take the opportunity in your initial meeting to outline what you can do to make the process as stress-free as possible for all involved.
This might involve telling them about your confidence in receiving a fair and correct valuation, guiding them through the valuation process, and fighting for their rights to a fair share of their business and marital assets.
There can be a lot of information to work through when you meet your clients for the first time to discuss their divorce with a business. Start with the information above, and you might ensure they have complete confidence in your abilities.
