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Special considerations for business owners during divorce

On Behalf of | Jul 12, 2023 | Divorce

When you own your own business, a divorce can be a lot more complicated for you than for other people – simply because you have so much at stake.

The ramifications of your divorce for your company’s future, not just your own, can be significant. Consider the following:

Do you have any pre-existing agreements about the business?

Ideally, you already have an agreement or agreements in place that carves out some exceptions to Arkansas’ equitable division process and protects your business. If you do have a prenuptial or postnuptial agreement or other agreement in place, it’s time to get it out and review it carefully so that you fully understand your position.

What do you hope to do with the business?

If you don’t have any agreements in place, you may want to start thinking early about what to do with your company. Depending upon your situation and how involved your spouse has been with the operations, your options typically include selling the business and dividing the proceeds, buying out your spouse’s stake or working out a co-ownership arrangement (even if your ex remains a passive or “silent” stakeholder).

How should the business be valued?

If the business needs to be valuated in order to proceed with the division of your marital assets and debts, you and your spouse will need to settle on a fair method. Typically, three of the most common methods of valuation include an asset-based approach, an income-based valuation and a market-based valuation. Each can produce vastly different results, so you and your spouse may have to do some hard negotiations to settle on the process.

How will support amounts be calculated?

Whether you owe alimony, child support or both, figuring out what amount of support you should have to pay can be difficult, especially if your income varies with the company’s profits. You may need to look carefully at your past income, the state of your industry and your company’s stability in order to determine what’s fair.

What are the tax implications of your divorce?

You may want to solicit the guidance of a tax professional to make sure that you don’t make any costly errors as your divorce proceeds. You’ll want to know more about tax-free transfers of assets, capital gains and other tax issues that may crop up.

When a divorce has the potential for disrupting everything you’ve built, it’s hard not to react emotionally – but that’s seldom in your best interest. Seeking experienced legal guidance can make it easier for you to clearly evaluate your options and find a strong path forward.