How We Protect Your Business In Divorce Or Mediation
author | Elissa Goldberg, Esquire
If you are going through a divorce, you need help from an experienced divorce professional to save as much of your business’s assets as possible.
Pennsylvania is an equitable distribution state, which means that, if a divorce goes to court, all marital property will be divided equitably, though not necessarily equally. Marital property includes property purchased during a marriage as well as the value of separately-owned property that has increased during marriage. This includes a business, even if it pre-existed the marriage, and even if the spouse has no ownership. Since the division of property is at the discretion of the judge, it’s in your best interest to try to come to an agreement outside of court.
Prior to filing for divorce, the best way to keep your business out of the divorce is a post-nuptial agreement. Or, consider signing a prenuptial agreement even before you get married. But hindsight is 20/20, as the saying goes. What can you do now?
Your first step is a valuation of your business by a forensic accountant to determine the value of tangible assets, intangible assets (such as goodwill), liabilities, and potential for growth. We recommend you have this valuation reviewed by another neutral party to be satisfied with the assessment before you bring it to the negotiating table.
Factors to Consider Before Negotiation
Once you have a good idea of the value of your company, we will help you make some important decisions and develop a winning strategy. First, ask yourself: Is the business worth the fight? If it’s a small business or has a low valuation and you could easily start over, would the best approach be to sell?
Assuming you decide the business is worth keeping, we’ll consider these factors when developing a plan:
How involved was your spouse in the business?
How much did your spouse support you and the company? For example, did he or she work to support you while you built the business or take care of the house and children so you could focus on the business, etc.?
How much has the business’s value appreciated during the marriage?
Did you co-mingle any household finances with the business?
Did you underpay yourself, in comparison to industry standards, in order to put more money into the business and help it grow?
These are questions the court will consider if an amicable agreement cannot be reached. We will look at these factors and others in order to estimate your spouse’s stake in the company.
Compensating your Spouse
There are a variety of options to compensate your spouse for his or her stake in the company. Ask yourself, “What’s most important to my ex?” Then we’ll work together to come up with a package of assets that will be compelling and lead to a reasonable agreement.
Consider offering other assets in exchange for a portion of the company’s profits or shares. These assets don’t always have to be the same dollar value. If it’s very important to your spouse to own several high-value antiques, for instance, there is an emotional component, an intangible asset, in a sense, that increases the value of that asset above the actual market price. Also, consider what property you could sell in order to pay your ex in cash. The current value of cash is often a strong incentive for settlement.
We at the Law Office of Elissa Goldberg have extensive experience helping business owners maintain the value of their businesses through a divorce. Contact us to discuss how we can help you.