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Lawyer Discusses Business Valuation in a Boston Divorce

Dealing With a Family Business During a Divorce

Almost every divorce is messy at first as you try to determine custody agreements, deal with a family home, and settle any remaining debts or financial issues, but your situation can get a whole lot more complicated if you add a family business on top of it. Many Boston residents understand how difficult it is to grow and run a business these days, and all of these efforts can be put in danger by a divorce.

If you operate a business and are going through a divorce, you may need to speak to a knowledgeable attorney to determine its proper value. Depending on when you started your business or how involved you or your spouse are in it, it can be considered marital property and be subject to property division. Speaking to a dedicated Boston high-net-worth divorce attorney may be your best option for protecting your business. Call DiBella Law Offices, P.C., today at (617) 870-0907 to get started on your case.

Why a Business May Be Marital Property

Signing a marriage certificate has very important financial implications. From the moment you get married to the day you separate, your property becomes intermingled with that of your spouse. When you go through a divorce, you start a complex process of untangling that property – which may now include a business.

Businesses can be considered marital property if they are started during a marriage or if they accumulate value during a marriage, even if only one spouse has a stake in them. Typically, this is not the case, as family businesses may employ both spouses to handle different tasks. In either situation, you will need to calculate a price tag for your business so that it can be divided under Massachusetts’s property division laws.

There are ways to protect a business, however. If you included it in a prenuptial agreement, it may be considered separate property. Even a postnuptial agreement may carry weight in your case and keep some assets, like your business, from being divided. In addition, if you started the business prior to your marriage, it may be considered separate so long as you never intermixed its funds with those of your household.

It is important to note that even if one spouse was not involved in the business, if he or she handled housekeeping tasks or managed the household, he or she may still receive benefits from that business. This is because Massachusetts orders an equitable division of property during a divorce, which means the court is interested in what is “fair” for the two spouses, not an even 50/50 split.

Determining the Value of Your Business

When evaluating a business’s value, it is important to work closely with a financial expert and divorce attorney who can review all of your assets, property, and debts. If your business is struggling or going through a bankruptcy, it could have major repercussions on your divorce. Determining the value of your business is necessary to determining how it can be divided and what ways you can protect it.

The most common methods for calculating the value of a business during a divorce include:

Asset Approach: With this approach, a financial expert can run your business’s property, assets, and debt through a simple formula to determine their value. This can include everything from your business’s inventory, rental properties, loans, credit, to copyrights.

Market Approach: The market approach involves comparing your business’s value to other businesses in your geographic region or practice area. For example, if you run a small clinic in the East End, we would look at other doctor’s offices to determine how the market would value your business. We may look at the size of your business, your revenue, and real estate prices in the area.

Income Approach: The income approach looks at the income that your business brings in to determine a flat value. This approach pays close attention to your business’s performance and how its value changes from year to year, including if it experiences a loss.

Solutions for Business Owners

There are no one-size-fits-all solutions for a divorce, especially when you factor in a business, but our team at DiBella Law Offices, P.C., has the experience and skill to guide you through the process. In a Massachusetts divorce, business can be:

Divided Between Spouses: This is more common when both spouses have a large stake in a business, such as a husband-and-wife doctor’s office or general store. If you own a franchise or a particular brand, you may need to set clear guidelines on where either of you can do business in Boston and what neighborhoods you can operate in. In terms of assets, you may need to divide them equally and create new trademarks for your separate properties.

Liquidated and Distributed: One of the simplest methods, but often the most painful, is liquidating a business. This means selling off all inventory and paying off any debts so that you have a flat value for the business. Then you can go about dividing that value between you and your spouse.

Buying Out Your Ex: Depending on the value of your business, it may be possible to buy out your ex’s stake in the business. This can occur whether your ex has a direct stake in the company or benefits from it in some other way. By paying for your spouse’s share, you can retain full ownership and keep your business running.

Let DiBella Law Offices, P.C., Handle Your Case

Starting a family business takes a lot of know-how, heart, and determination. Going through a divorce may put all that work in jeopardy if you do not understand your rights under Massachusetts’s state laws. Our Boston family law attorneys at DiBella Law Offices, P.C., have worked with many clients who were going through difficult divorces and helped them move on. We can talk through your case in a free consultation and explain how to move forward. Call us at (617) 870-0907 to discuss your case.