“Complex and potentially contentious.”
We use those words to describe the inherent complications and volatility that can mark family-run business valuations in the divorce process.
That a bit of angst and heightened concern will be on ready display for some divorcing couples who own a family business is easily understandable. Many spouses used sweat equity, personal finances and all their entrepreneurial energies over many years to get an enterprise off the ground and profitable. Understandably, they take pride in that and want a just accounting if their business is sold, with the divorce-linked proceeds being equitably distributed as marital property.
We note on our website at the established family law firm of Robertson, Oswalt, Nony & Associates that the often existing complexities and emotions surrounding a family business can be even further compounded in some instances. That can be especially true when divorcing parties simply can’t agree on material matters, such as these:
- Accurate valuation of the business
- Considerations — if any — relevant to existing employees
- Respective contributions of the parties that have promoted enterprise success
- Untangling of separate-versus-marital assets in the business
Those above bullet points are simply representative and limited examples of the issues that can derail smooth asset-division negotiations in a divorce. And when soon-to-be-ex partners cannot come to terms on them and additionally important matters, it is likely that a court will need to step in to make its own legally binding determinations.
It certainly bears noting that, because every divorce is unique, final decisions involving a family business will vary greatly from case to case. Not every enterprise is destined for sale.
A recent national article on one divorced couple focuses on how they have handled their family business in the wake of divorce. It is an interesting read, and we will note its material details for readers in our next blog post.