Knowing how to divide the assets of a joint business venture when you divorce, can be challenging. It is important to look at the situation from all angles to determine what will be most beneficial for the business and all parties involved. Keep reading to find out what our readers recommend you consider before dividing your business.
Andy Heller from takethehighroaddivorce.com.
Present and Future Value of Business Assets
Initially, divorcing couples will focus on the value of the business asset to be split. There are two primary factors to consider when looking at value.
● The present value of the business asset(s)
● The future value of the business asset(s)
● A third factor is a degree to which both spouses’ contributions are impacting the value of the asset(s).
Clearly, it is cleaner and easier to reach a settlement on an asset where only one of the spouses is actively involved.
An example of a hard-to-divide asset that is intrinsically associated with the family unit would be a family restaurant that has been jointly run for years. Dividing “Ma and Pa’s” diner without Ma or Pa is difficult, and the absence of one of the spouses could clearly impact the future value and sustainability of the asset.
The financial value of the asset(s) tends to attract most of the attention when a couple is divorcing. A factor that often does not get ample consideration during divorce is the emotional impact. A great example of this is a couple that jointly owns a 25-unit apartment building.
If the divorce is occurring during a down cycle in real estate, it might not be optimal, from a valuation standpoint, to sell the apartment and divide the proceeds. Therefore, from only a financial perspective, the optimal course of action might be to hold onto the apartment building and sell at a time in the future when maximum value can be realized.
However, if one of the separating spouses is seeking a greater degree of separation for his or her mental health, this could come in conflict with the value maximization sought when selling the asset. There is no simple answer to this dilemma, as the type of assets and level of joint efforts in maintaining the asset can vary substantially from asset to asset.
The best advice here is to raise this awareness, and for the pending divorcee to try to identify the mental health impact or goals around post-divorce connectivity tied to business assets. If this is a concern, sit with both an attorney and ideally a therapist and seek to map out a strategy specific to the joint business asset that takes into consideration both the mental health of the divorcee (if holding onto the asset for a period of time post-divorce) as well as the mutually beneficial goal of maximizing the value of the shared business asset.
This is a crowdsourced article. Contributors’ statements do not necessarily reflect the opinion of this website, other people, businesses, or other contributors.