Spouses are not only partners in their marriage, but often find themselves embarking on a joint business venture. This journey in entrepreneurship is a great idea, but often brings with it an outrageous amount of stress, anxiety, and worry. This can put a strain on relationships and, if the unfortunate decision to divorce does come to fruition, determining what to do with the business becomes a priority. A court is expected to determine if a business is indeed a separate or communal property, which can make things difficult. Then, once that is decided, there are countless factors that pop up, even if a business is considered a separate property. Let’s explore some of the basics involved in a business division and business valuation in a family law and divorce law case, and how you can prepare yourself for such a case.
Why Business Valuation?
Like any property involved in a divorce dispute or child custody battle, business interests are another piece of the financial puzzle in a separation. Much like questions may arise on home ownership or who incurs what amount of debt on a mortgage or loan, business interests and ventures are also property of the spouses. Valuation of a business interest gives both spouses a fair shot at acquiring what they feel is fair for themselves following the dissolution of the marriage.
A business valuation involves numerous steps and is best handled by a financial professional or a legal team with experience in the field. A skilled attorney takes an in-depth approach, analyzing all of the financial statements from beginning to present. Doing this allows them to find any lost or hidden income opportunities, as well as have a clear picture of the financial inner-workings so you can have the most accurate and efficient family law representation.
Community Property Interests and Issues
When it comes to business valuation and dividing a business, Arizona law deems that this situation falls under the community property laws just as any other marital property would. If a business was created, built, and run within the marriage, for example, that then becomes a community property. However, if a spouse owned or started their business prior to the marriage, inherited it, or acquired it individually, the community property interests likely will not apply.
Another dimension to be considered, though, are improvements or investments in an individual’s business that were contributed to, either fully or in-part, by the spouse. Examples would include purchasing a company truck together for the individual’s business, a down payment on a new real estate location, or similar cash investments. As a result, the individual deemed not to be owner of the business would be entitled to half of those investments since those would fall under community property.
What Does a Business Valuation and Division Mean?
Oftentimes, when a couple invested in and began a business during their marriage, the court will give them equal interest in the company or venture following a divorce. Much like a child custody agreement, the spouses have rights to make changes or have discussions following a court ruling, but must adhere to the agreement. Options for division of ownership would include moves like selling their ownership, taking a different role in the company or interest, or dissolving the company. This also takes into account other parties who may be involved in ownership, ensuring they are not entirely disregarded during these proceedings. A valuation by a trusted and experienced financial and legal expert will provide the court with an unbiased look at the business as a whole, rather than only having the subjective views of the owners involved in litigation. A skilled attorney understands it might be confusing, but the bottom line is ensuring equal and proper division of a business interest for all parties involved.
Division of business interests and business valuation can be a high-stress situation, especially when added into the arena of other family law issues like child custody rights, mediation, or divorce. An experienced divorce attorney Phoenix AZ relies on understands it is not easy to navigate these issues alone.
Thanks to our friends and contributors from Hildebrand Law for their insight into dividing business and business valuation.