When two people decide to separate and go their own ways, they need to take into account their assets and belongings so that everything can be distributed in the most equitable way. This can be a complicated process at the best of times, but it can be even more challenging when a business is involved. So, if you are in this situation now and your former partner owns a business, are you entitled to half of it, or what happens next?
When A Business Becomes Part Of The Asset Pool
Certainly, a business will be included in the asset "pool," and the first step is to put a valuation on it. This is the case whether the business is in sole ownership, a partnership or a limited company. Still, this does not mean that the business must be wound up or sold in order to realise a net monetary value. However, it does mean that the business must have accurate and up-to-date records, and you will need to bring in an experienced expert to arrive at those important figures.
Is There An Automatic Entitlement?
Just because you're going through a divorce and separation does not mean that you are automatically entitled to half of what the other person has. And this is certainly the case when it comes to the business itself. Once it has been valued, this figure will be added to the overall entitlement, but the actual split will be determined by family law principles and other factors that may need to be considered by the judge.
How To Value The Business
Clearly, every business is different, and there are several ways of providing a valuation. This is why the valuation expert needs to be impartial so that they can come up with the most appropriate figure. They will need to consider whether the business is still vibrant and ongoing with stable revenues. They'll also need to take into account what it may owe, and whether they can classify any "goodwill" as a recordable asset.
How To Deal With A Limited Company
Many businesses today are their own separate legal entity with a "limited" designation. In this case, it'll be valued according to the total shares, and this may become more complicated if one or more of those shareholders was a third party and, therefore, not involved in the divorce.
What To Do Next
As you can see, it's not always easy to figure out how a business may factor into a divorce agreement. Much may depend on the actual case itself and how it is presented to an adjudicator. For this reason, you should bring in an attorney with business experience so they can advise you on how to proceed.
Speak to a family law lawyer to learn more.