When you are facing divorce, you are probably not looking forward to the property division process.
If a family business is involved, you may already feel overwhelmed. However, the more you know about what to expect, the easier it will be to get through it.
Whether the business has only been in existence for a few years, or yours is the second generation to own and run it, you must establish a standard of value. In fact, there are two standards to consider: fair value and fair market value. The latter is the price that is set in the event the business changes hands from a willing seller to a willing buyer and there is no compulsion to do either. Fair value is established relative to the context of use, and the court sets the value.
Spouses may disagree over the value of the family business, and between the two standards, significantly different value estimates may result. Therefore, it is incumbent upon professional appraisers to choose the correct standard of value or the judge may dismiss their opinions, which would result in delays that no one wants.
A word of caution
If your spouse controls the family business, you should verify his or her income. Remember that business owners can control their revenue and expenses. They can underreport their income, for example, and many seek to minimize taxable income. Your spouse may not be dishonest or evasive, but on the other hand, you will want to ensure that you receive the appropriate spousal or child support. An investigation into the company financial records may therefore be advisable-and an investigation of this sort is not unusual in a divorce case.
Following the law
Owning a family business may make asset division more complex, especially as the standards vary from state to state. The opinions valuation experts present must adhere to the statutes of the jurisdiction in which the divorce case takes place.