Most couples are aware that divorce can impact many aspects of life, but many are surprised by the challenges that owning a business can bring. Since a business can represent the majority of marital assets and income, dividing up ownership can become a complicated aspect of the divorce proceedings. Which parts of a business qualify for division largely depends on how much business income the owner claims for his or her own tax liability, and the Tax Cuts and Jobs Act of 2017 may provide a guideline for making this determination.
No matter how hard a business owner decides to draw the line between the business and the personal, a certified business appraiser will need to evaluate the total worth of the company. It’s also important to accurately calculate the available value. Based on this number, one spouse may decide to buy the other out of ownership. If this cannot be accomplished through a lump sum of money, promissory notes or other creatives structuring of alimony payments may be adequate.
During legal proceedings, the business will be under heavy scrutiny in order to determine everything from asset division to child support. At the same time, it’s important for both the divorcing business owner and his or her spouse that important business documents, like tax records and financial statements, be kept confidential. This is to protect the long-term interests of the company.
In order to navigate the complicated process of dividing up a business, owners going through a divorce should work closely with an attorney along with tax advisers and other financial experts. Whether the separation is contentious or amicable, a lawyer will do everything within his or her power to protect his or her client’s short- and long-term financial interests in the business.