In this episode, we discuss important information about your business during divorce.
If you are going through a divorce and have a small or large business, you must be wondering what to do with it and how it will be split. You need to know the following things about your business when you are involved in a divorce.
- What type of business entity is it?
- When was the company started?
- Has the company changed its legal status?
- Who manages the business?
- What is the business worth?
The most important consideration is the legal classification of your business. Is it an LLC, a corporation, a sole proprietorship, an LLP, a partnership, or some other type of legal structure?
When was the company started? This information is crucial to determining whether the business is separate or marital property. If it was started after the marriage, that makes it marital property and subject to division during the divorce settlement.
Has the company changed its legal status? Although uncommon, companies do change their legal status for a variety of reasons, and if this occurred during the marriage, the business can suddenly become marital property. This determination can be found during initial fact-finding, and your attorney will help you with this search. Tax returns will also provide this information.
Who manages the business on a day-to-day basis? If both of you work in the business, it can have a different effect on the settlement as compared with one spouse managing it. It is important to understand who works in the business, how, and to what extent.
What is the business worth? You will need a CPA or a certified business evaluator or a certified business appraiser to help you determine the value of the business. It can have very important implications for your divorce settlement. If it is a large business, you need to hire an expert and get an accurate estimate of what your business is worth. Having an accurate idea of its worth can greatly affect what you receive during the settlement.