How my business will be divided up in the case of a divorce
Divorce involves not only an emotional breakup, but also a distribution process. Distribution of income, property and even children, if any. That’s why men who own a business often suffer from nervousness, frustration and anxiety when they’re on the verge of divorce.
Although it is a distribution and the man get a share of the business, the man worries because this distribution can seriously affect the long-term viability of the business. “How can I continue my business if half of its value will be allocated to my former partner?” is a question that often invades the minds of those business owners who are suffering the legal misfortune of a divorce.
Unfortunately, at times like that, nervousness invades men to such an extent that it damages their judgment and they decide to take irrational actions in order to diminish the value of the business. They figure that way; their ex-partner doesn’t get a significant value.
If you are one of those unfortunate ones and you are reading this, we recommend that you calm down for a moment, wait and analyze everything carefully. Prudence and calm are virtues you will need if you want to avoid the legal consequences of divorce from consuming you completely. First, it is highly recommended that you look for an excellent divorce attorney. You should also locate an expert to accurately determine the value of your business. Some law firms (probably all or most) with expertise in divorce cases have their own experts; if you search well, you will save yourself a second search, that is, the expert’s one.
Secondly, we would again recommend that you proceed calmly. Do not allow your inner self to be devoured by irrationality. Emotions such as impatience, nervousness and anger. Success in your case is inversely proportional to the amount of these emotions you possess. Safeguarding your business depends on it.
In this article, we are going to delve into this topic. It is important to note that this article will only explain some general legal aspects. In order to obtain proper legal advice, it is imperative that you hire a good divorce attorney. Once your lawyer has all the facts about your particular situation, he or she will be able to make a correct diagnosis and tell you what to do and what not to do.
On the other hand, it is important to clarify that this article is intended for both women and men. Although men as business owners are still in the majority, for social reasons, there are also women business owners, and we cannot ignore them. In addition, we are pleased to note that the number of women business owners is rising considerably.
Thus, there are women who are also victims of the legal distribution that occurs during divorce proceedings., these women can benefit from the information provided below.
Businesses are assets
As a business owner and person in divorce proceedings, one of the first things you should consider is that your business is an asset. This assertion is not just obvious: the condition of “asset” implies several things, from a legal point of view.
Mainly, being an asset means that it must be categorized and an approximate amount of its value must be determined. With regard to its categorization, it is necessary to determine whether the heritage is communitarian, individual or mixed (I. e. a combination of communitarian and individual). Categorization is a key element for the effective distribution of its value.
Likewise, the value analysis identifies the “valuable” parts (which can be subject to valuation, worth the redundancy). It is necessary to determine whether the communitarian part of the business can be valued; or whether, on the contrary, valuation only applies to the individual section of the asset.
What if my business was formed before marriage?
The date of business creation plays a very important role when the legal distribution resulting from a divorce is taking place. If the business was formed before marriage, then that business, as an asset, has an individual portion. Now, what is the extent of that individual section? How far does it reach? The answer to these questions depends on several aspects:
1) The age of the business: As we said, the date of creation of the business is extremely important; but not only it is considered whether it was created before or after marriage, but, if it was created before, it is also considered how long before marriage.
2) Business assets and profitability: Businesses expand over time: they grow or decrease. Acquire more assets or are reduced. The trend in the possession of business assets is generally upward. As well as earnings and profitability. This is also crucial. To determine how much your ex-partner owes, you must also determine what the business’s premarital profitability was and what assets it owned.
3) Business value at the time of marriage: Obviously, the present value of the business is not the same as it was when you married. It is necessary to calculate both values for a distribution according to fair parameters.
4) Evolution of the value of the business: Apart from determining the values of the business before and after marriage, an analysis must also be made to visualize the evolution of the value of the business (if it has increased if it has not suffered statistically significant variations if it has decreased). The difference of this fourth aspect with respect to the previous one is that the last one is two absolute values, while the first one refers to a whole range.
5) Factors in the evolution of the value: In case it is not enough with the calculation of the values before/after (see aspect number 3) and the evolution of the value (see aspect number 4), a causal analysis must be carried out: identify the factors involved in the aforementioned evolution of the value, as well as their degree of incidence. For example, determine the impact of community efforts (if any) or market conditions (supply/demand, etc.).
Of course, these elements are not the only ones, but they are multiple and each one of them reports a certain usefulness in the analysis of the distribution of the business’s value in case it has been created before you and your spouse were married. However, we attach more importance to those that we have mentioned, so we recommend paying more attention to them than to others.
What if the business was given to me by family inheritance?
One of the trickiest scenarios and, one of those that generates the greatest amount of doubt (although not necessarily the most frequent) is that in which the business was ceded to the person by family inheritance.
Imagine, for example, a shoe store. This shoe store was originally created and constituted by your father; after a lot of years, your father decides to withdraw from the business and leave it to you. Once it has been granted to you, which happened while you were married, you invest a lot of time and money in the shoe store. Then the divorce comes. How does the legal distribution apply in this scenario? How do you categorize and calculate the business value?
The first step to be taken is verification and confirmation that the business was indeed passed on to you by family grace. Or, failing that, check that the conveyance was not carried out with a communitarian interest.
The second step to take is to specify the extent of your business ownership. In many cases, business conveyances by family inheritance do not have a single beneficiary, so several people own the business.
In these cases, it is necessary to determine the percentage or degree of your ownership right.
Basically, this analysis serves to answer the following questions: What is your percentage share? What is the degree of ownership of the other beneficiaries (if any)? Is there still some kind of possession right on the part of the giver, namely the person who bequeathed you the business?
Once all of these questions have been satisfactorily answered, the next step is to calculate how much time and money the community could have invested in the business. In this way, it is determined whether the community has any interest in the asset in question.
Unfortunately, we can’t go on talking about it any longer because it would be too long. However, we have the freedom to do so in another article, where we will explain other additional aspects (because they are not few, as you should know).
Our final recommendation is that you devote your efforts to finding an excellent divorce attorney (or a highly skilled law firm) and an expert who has years of experience in his or her work, as this ensures that he or she is familiar with all the details involved in divorce litigation.