Divorcing Your Business Partner Can Be Tricky
The divorce process can be that much harder when a married couple is faced with the prospect of splitting the assets of a business they both helped build. Most of the time they can work out a friendly agreement, but other times big disagreements – especially concerning the business’s value – can wreak havoc on the divorce procedures, resulting in higher legal costs and a longer overall process.
In our experience, there are really only two ways to come to a true and fair valuation of a business when the business’s owners are going through a divorce.
- The Collaboration Model: Using this model, we will conduct a valuation of the business and discuss findings with all parties involved. Then, discussions will take place with each owner’s attorney in an attempt to address any questions or concerns. In the event of litigation, your valuation team will be present at the court proceedings to offer expert testimony on the matter.
- Marital Balance Sheet: This model requires your valuation team to itemize the business in a way that’s organized and easy to read. The prepared balance sheet will then be presented for review. At that time the business partners will then be able to take the compiled information to their respective attorneys to determine their next course of action.
These two options are optimal for those looking for peace of mind while minimizing the cost of drawn-out litigation and we’ve found that when divorcing couples work with a valuations expert, rather than leaving the decision up to a judge, they are more likely to realize a more favorable outcome.
While we always recommend that couples have a business valuation conducted earlier (optimally before getting married) rather than later, we realize that it doesn’t always happen this way. It’s just important to remember that there are still options available.
If you are currently filing for divorce, and there is a business involved, make sure you go into the divorce proceedings with the necessary information. Contact Rea’s business valuations team to learn more.
By Tim McDaniel (Dublin office)