Valuation and division of business assets difficult in divorce

For Maryland business owners, the end of a marriage can bring significant damage to the structure of a business. Some savvy entrepreneurs will have drafted prenuptial or postnuptial agreements that address the manner in which the valuation and division of business assets should take place in the event of a divorce. However, many business owners did not foresee the end of their marriage, and did not envision a scenario in which they could lose a portion of what they worked so hard to build.

Absent a marital contract, business assets are subject to the same process of division as any other form of marital assets. This means that both spouses will share in the divided value of the business, regardless of how much or how little either party contributed to the success of the venture. The first step of that process is placing a monetary value on the business.

In many cases, the ability to estimate a value depends on the input of multiple professionals. Real estate appraisers can place a value on the physical property itself. An accountant is also sometimes called into service to determine a value for various accounts and holdings that are part of the enterprise. In more complex scenarios, consultants can evaluate a business from top to bottom to determine a value.

Once the value has been determined, spouses negotiate the division of that value. The most common breakdown is for one spouse to retain the business while the other receives a payout for his or her share of the company. This is sometimes accomplished through a lump sum payout, but is more often the result of one the retaining spouse accepting fewer of the non-business marital assets.

For Maryland business owners who do not wish to go through the valuation and division of business assets outlined here, the only way to protect a business from losses during a divorce is to draft a prenuptial or postnuptial agreement. If that option is not available, business owners should take an aggressive legal stance that preserves as much of their business and marital wealth as possible. Doing so can save a business from significant losses and even the risk of closure.

Source: Cleveland Jewish News, In divorce, separation of business not easy, Andrew Zashin, Dec. 20, 2013