Family break-ups are rarely straightforward but when your business forms part of your separation, dividing the assets can be a fraught and complex affair.
One of the fundamental steps in a property settlement is to compile an accurate list of the assets and debts, and their value. If there’s a business, what’s it worth? It may be necessary to have an independent forensic accountant provide a valuation. Usually each party pays 50% of the cost.
Once you have the list of assets and debts, you need to work out the appropriate division. This involves assessing the contributions made by each party and assessing the future needs of each party.
When it comes to working out the practicalities of the division and there is a business, there can be further complications. Here’s an example. The value of the assets may be agreed, so too the percentage division. But what if the business has a considerable value while the other assets are of modest value? Yet one party plans to keep the business. How does the spouse who is leaving the business get their fair share of the overall assets? Perhaps the spouse keeping the business will be able to borrow money but if they aren’t receiving any other assets, security for the loan may be an issue. Maybe payment can be made over time. Or perhaps the business will need to be sold, despite the wishes of one party.
When a person is getting out of a business, the final agreement needs careful consideration, taking into account issues such as loan accounts and tax.
Often ex-partners are keen to “just get it over with and move on” but this is certainly not a path to tread lightly, or without expert advice.
