Divorce for Business Owners
Most businesses have both tangible and intangible assets. That makes property division difficult, but not impossible. Our Norcross divorce attorneys can help.
Even if only one person’s name is above the door, a family business is just that. Everyone in the household contributes to the business, either directly or indirectly. Georgia law equally recognizes both of these kinds of contributions. So, a marriage dissolution property division must fully account for a family business. However, the process is often complex.
At Zimmerman & Associates, we routinely handle divorces for business owners. We use proven methods to accurately value both tangible and intangible business property. Then, we provide long lasting and cost-effective solutions. But before we get started, we begin every case with a conversation. Once we understand your needs and goals in a certain situation, we formulate an approach, and never stop fighting for you.
Classifying Business Property
By law, most property acquired during the marriage is marital property which is subject to division during a divorce. But this rule is not always straightforward, especially in terms of business property.
Assume Husband owned a rental property prior to the marriage. Shortly after the wedding, Wife used a gift from her parents to fund improvements to the property. If the couple later divorces, the house could be Wife’s nonmarital property, Husband’s nonmarital property, or marital property subject to division. The same thing applies to prior, current, and future rental income.
There are other issues as well. Most business property is legally marital property. But some is legally nonmarital property. The rule is rather complex, and the business’ goodwill is a good example. If the goodwill comes from the business (e.g. Amazon), the goodwill is marital property. But if the goodwill comes from an owner’s name (e.g. Jeff’s goodwill), the goodwill is non-marital property.
Possible Valuation Models
Business goodwill is the best illustration of an intangible business asset. All businesses have goodwill assets. But not all businesses have tangible assets. A writer’s fixed assets might consist of a cell phone and a laptop, but the revenue could be substantial.
So, before dividing property that has been properly classified, our Norcross business owner divorce attorneys must properly value the property. Several methods are available, depending on the facts of the case. Some common approaches include:
Market Approach: This model works well for businesses which are bought and sold frequently, like restaurants or clothing stores. But it does not work well for businesses which are not bought and sold a lot, like a ridesharing business.
Income Approach: Since income is usually a business’ largest single asset, this method estimates future income. But this approach may overestimate the value of income in some cases.
Asset Approach: Subtracting liabilities from assets (including income) is one of the best ways to value many businesses for divorce purposes. But this approach sometimes undervalues intangible assets, like goodwill.
Obviously, there are pros and cons with all these methods. A good Norcross business owner divorce attorney must select the best one for the facts, and also convince the other side to join in the plan. Often, accountants and other outside professionals are used to assist.
Dividing Business Property
In many cases, these exercises never take place. Some couples have better professional relationships than personal relationships. So, in many cases, they may continue operating the business as before. That is especially true if the owners do not need to interact with each other very much.
In other situations, business property must be divided in such a way that the divorce is not an unfair financial burden for either spouse. That usually, but not always, means a roughly 50-50 division.
Finally, a buyout may be an option. One owner may assume total control, either via a cash payment or an offset. For example, Wife may waive her interest in Husband’s retirement account if Husband hands over control of the business.
Contact a Tenacious Attorney
Divorce property division matters are often complex, especially if a business is involved. For a consultation with an experienced Norcross divorce lawyer, contact Zimmerman & Associates, Attorneys at Law. Convenient payment plans are available.