How is a business divided in divorce? “Determining the value”

A business is considered a marital asset when two important factors are applicable. The first consideration is if the business was developed and opened for operation after the marriage. Secondly, if the value of a pre-marriage business increased during the marriage. Either one of these factors subjects the family business to be distributed during a divorce. An accurate business valuation will help determine the distribution of the assets in divorce to complete a fair and seamless transaction.

Calculation of assets

There are tangible properties (such as vehicles or business equipment, stocks, bonds or cash) to be valued along with intangible properties (such as patents or trademarks). Both of these economic resources provide value to your business. In order to have an equitable settlement agreement, all business assets must be calculated and taken into consideration. For that reason, it is important to have a professional valuation that will “leave no stones unturned”.

Provide all information and complete records

You will need to provide clear information regarding your business such as its products and services. You will also have to include detailed financial statements from the past five years.

The basics include:

  • Balance sheets
  • Income statements
  • Cash flow statements
  • Statements of owner’s equity

Providing all legal documents regarding the business will establish legal ownership. Include all tax returns, business and personal. In some instances, family members may take less of a salary, keeping the money for business cash flow purposes. All factors regarding finances must be carefully considered in the valuation. Financial statements will include business sales, profits and losses. Balance sheets and cash flow records will give light to monies owed and the total net worth of the company. Bank statements will provide accurate information regarding any investments or retirement accounts.

Future intent of the family business

The future of the family business might include selling. Alternatively, one or both parties may continue in the business. Your business may consist of a sole proprietorship or may be a joint venture with outside parties not part of the divorce. All of these factors will come into consideration during the valuation.

Finding the help you need

The attorneys at Most & Schneid are here to help. Through our expertise and knowledge, we will work to help you receive a fair settlement regarding your family business in your divorce. No one wants to feel as though they were financially slighted. Divorce can be heated and bring out a great deal of controversy. Having an accurate and precise valuation will help reduce or completely avoid arguments.

There is no reason for the division of business assets in a divorce to be lengthy or unfair. In New York, the attorneys at Most & Schneid can help you come to an agreement regarding equitable distribution. You can contact us by calling our White Plains office (914-997-9181) or our office in Garden City (516-453-9000).