Business Owners and Divorce
Divorce is complicated enough when dealing with standard marital assets such as bank accounts and family homes. And when one or both parties to the divorce have an ownership stake in a business, matters can quickly become even more complex. Is business ownership subject to division in divorce? How do you value or apportion business ownership? In this article, our Las Vegas divorce attorneys discuss the challenges faced by business owners in divorce.
Is a Business a Marital Asset?
First let’s assume the spouses do not have an enforceable prenuptial or post-nuptial agreement fully resolving the issue of business apportionment. (We’ll discuss pre and post nups in a later article.) In Nevada, all community property is subject to division upon divorce, while separate property remains separate and apart from the proceedings. Absent an enforceable agreement to the contrary, the business is marital property subject to division during divorce proceedings. This marital property issue unveils a host of issues:
- When was the business started?
- Did one or both spouses start the business?
- Where did the funds come from to start the business?
- Did one or both spouses work at the business and help build it?
- Were marital funds ever used to increase the business value?
- Does the business have outside partners or shareholders?
- What is the agreed upon value of the business?
- Do the spouses want to sell the business?
These are not trivial matters. Business ownership poses many complex questions in a divorce proceeding. The determinations made during the divorce case can have immediate and long term financial and logistical consequences. Business owners and their spouses require a divorce attorney with a deep understanding of divorce law and a successful track record in complicated divorce cases.
Establishing the Business Value
An important aspect of business ownership interest is determining the value of the business. The value of the business must be assessed before it can be divided. The spouses will likely need to hire one or more professional business valuators to accomplish this. Sometimes the divorce attorneys representing each spouse can agree on one business valuator. But if that cannot be agreed upon, each party has the right to produce their own business valuation report from their own expert witness. Expert business valuators must have a detailed understanding of business, finance, and to the degree possible, knowledge of the industry of the specific business at issue. They should also be certified experts by the Clark County Family Court.
Dividing the Business
The divorcing spouses or the court will need to decide who gets what share of the business interests upon divorce. If the parties can agree to business ownership value through the negotiations of their respective divorce attorneys, all the better. If they disagree, the court will need to decide.
One of the most common ways to deal with splitting business ownership is an asset trade-off: One spouse gets the business (typically, the spouse more involved with running the business) while the other spouse gets assets equal in value to their marital business interest, whether that be cash, stocks, bonds, real estate, or other property.
In addition to the complexities of establishing and distributing ownership, it is important to keep business administration in mind during and after the divorce. Payment terms in the divorce could affect cash flow for the business. Shifts in ownership could affect business management, shareholder value, and business partner confidence. If you are dealing with business ownership interests as part of your Las Vegas divorce, make sure you have an experienced, knowledgeable, and successful divorce attorney on your side.
Expert Legal Representation
We are the only Las Vegas area law firm exclusively dedicated to complex divorce matters. Every divorce attorney at our firm is State Bar of Nevada Board Certified. This certification is attained by less than one percent of all Nevada licensed attorneys. Call us for assistance with your complex divorce or divorce-related matter. Our expert divorce lawyers are ready to lead you through all aspects of your case. This includes business ownership interests, alimony, property division, child custody disputes, and all divorce related issues. Attorneys Jennifer V. Abrams and Vincent Mayo offer courtesy phone consultations at no charge. Call 702-222-4021 to speak directly with one of them and get the answers to your important concerns.
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