Divorces are complex and personal on so many levels. These two things seem to collide even more when it is time to divide the marital assets. One of the more complicated assets to divide is a business. If you own a business, you may be concerned that your spouse will be entitled to half of the business in a divorce. This, however, is not necessarily going to be the case. Let us discuss this in more detail here.
Is My Spouse Entitled to Half My Business in a Divorce?
Arizona is a community property state. This means that marital property is owned equally by both spouses. It does not necessarily mean, however, that a business jointly owned by a spouse will be divided 50/50 in the event of a divorce. The court will consider a number of factors in evaluating how the business should be divided, including whether one spouse made significantly more contributions to the building and running of the business. The court will also consider whether a spouse brought business assets into the marriage. Furthermore, it is important to consider the fact that the business as a whole may not be considered a marital asset. For instance, the business may have been owned by one spouse prior to the marriage, and only the part of the business that accrued value or to which one spouse contributed value would be considered a marital asset subject to division.
It is actually relatively rare for a business to be divided in half between two spouses in the event of divorce. In some cases, the court may even be prohibited from doing so if there are other owners involved in the business that would be impacted by a 50/50 split. In lieu of splitting up the business interests between the two spouses, it is quite common for the spouses to opt for a buyout or offset option. A buyout option lets one spouse buy out the business interest of the other spouse. In the event of an offset, the spouses can agree to let one spouse keep the entirety of the business while the other spouse receives other marital assets in exchange for forfeiting interest in the business.
The set buyout amount and the terms of the buyout will be largely based on the business valuation. The valuation of the business will also be important in determining the offset that should be granted to the spouse waiving his or her right to an interest in the business. The valuation of a business, however, can be very complicated and usually involves needing to retain an expert in business valuation. Usually, however, the valuation of the business will involve appraising the worth or value of the business. The value of a business often depends on its:
- Physical assets
- Cash flow
- Overhead costs
- Appreciation of business equipment
- Depreciation of business equipment
- Customer loyalty
Family Law Attorney
If you are concerned about what will happen to your business and other assets in the event of the divorce, talk to the trusted divorce attorneys at Cohen Family Law. We will discuss your options with you and develop a plan to see how we can accomplish your goals and priorities. Contact us today.