For couples who have been separately or jointly successful in a business venture, one of the most important asset-driven decisions to consider in a divorce is how that business will be divided between both parties.

How a Business is Valued

The first step is to understanding the process is to put an actual value on the business itself. There are typically three ways to determine value:

Asset approach: focuses on the value of the company’s assets or the market value of its total assets after taking out liabilities

Market approach: a comparative approach looking at other public companies or those with available records and transaction histories

Income approach: value based on the actual income of the business

It will likely be necessary to have an independent third party appraise the value of the business as part of the divorce process to get a true perspective on the divisible value of the venture. If a number can’t be agreed on, it may require the intervention of the court and the court’s own appointed valuation expert, which could take significantly more time than if a settlement was agreed upon beforehand.

What Happens Next

One of the more common resolutions is to have one spouse buy out the other’s interest in the business after the divorce has been made official. This works if the business is available to own by either party and doesn’t require one owner to hold a professional license. There are also a number of tax implications to consider when setting up this plan.

Another option is that the business will be sold if both parties can’t agree on an alternative plan. Spouses divide the proceeds of any sale and this occasionally requires a court intervention to move things along towards a resolution.

Lastly, although not common, both spouses could continue owning the business after the divorce, which may make sense in high-net worth situations.

Business interests within a divorce are a particularly sensitive and tricky matter. It’s important to consult a qualified divorce attorney to learn more about your options. Call the Law Offices of Rusty Williard today at (601) 824-9797 to schedule your free consultation and learn more about how we’ve helped Jackson and Brandon clients.