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Splitting business assets during divorce is tricky business

Going through divorce can be both emotionally and financially taxing. This is especially true if you and your spouse have a large number of assets to divide between yourselves. It is also true if you have a high-value asset, such as a family business, to split up.

The process of getting a divorce in Arizona is inherently complex. For this reason, understanding the additional issues you must address when a business is at the center of this type of family law proceeding is paramount. After all, looking over these issues and making the wrong choices may end up costing you financially in the long run.

Distribution of the business

You and your spouse can divide your business in the following ways:

  • Buyout: Perhaps you would like to buy out your spouse’s interest in the business according to the results of a business valuation you have done.
  • Offset: Maybe you prefer to keep everything related to the business and let your future ex keep other marital assets
  • Joint ownership: You and your spouse could both agree to maintain ownership of the business and simply negotiate your respective interests as partners in business.

Business valuations

Business valuations are an important part of divorce proceedings, as without knowing what your family business is worth, you may not be able to fairly negotiate your divorce settlement. The valuation needs to take into consideration a variety of factors, including the following:

  • cash flow
  • overhead costs
  • customer good will
  • depreciation or appreciation of equipment
  • physical assets’ value

50-50 division?

Based on the other aspects of your family law proceeding regarding property division, dividing the business 50-50 may not be appropriate. Extra factors that are important to consider include the contributions that both of you made to the venture both prior to the marriage and during your union. You may also want to consider both parties’ interests outside of the marriage as well as whether one spouse owned a portion or all of the business-related assets before you got married.

The ultimate goal when tackling the division of a business during divorce in Arizona is to preserve or profit from the assets, limit your tax penalties and enable both parties to leave the marriage as financially secure as possible.

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