What Every Business Owner Should Know Before a Divorce
Divorce has ramifications on various aspects of your life. It requires a change in living arrangements and bank accounts. Couples need to determine child custody and division of assets. Also, divorce affects your business interests, and a business owner in Oregon will quickly encounter a set of concerns about company assets and future ownership.
The apprehension that a divorce could affect your business interests is warranted. It is likely that your business is your largest asset, and the value of the business will definitely be part of the conversation during divorce proceedings. In Oregon, the court seeks to divide marital property in a manner that is equitable to both parties, and along with cars, homes, and personal possessions, your business interests could be martial property. Here’s what else a business owner needs to know before a divorce.
Division of Time During Division of Assets
A divorce in Oregon, particularly a contested divorce, can occupy a significant amount of time and energy. There are phone calls and emails to answer, meetings with your divorce attorney, and court dates. The process can also take its toll emotionally. Many business owners find that an unexpected threat to their companies is their inability to lead and direct during a divorce.
A business owner should be prepared for a substantial reduction in the mental and financial resources available to the business as a divorce takes place. Steps to reduce the impact may include delegating specific tasks and any day-to-day decisions to a manager or other employee and pushing back major business decisions until after the divorce is finalized. As well, hiring a divorce attorney that recognizes and understands your business commitments is important. All of these decisions ensure a business can survive a brief, but noticeable, absence of you, the owner.
Necessary to Value Your Business in Divorce
Typically, one of the first things your spouse’s attorney will request is that the value of the business is definitively determined. In some circumstances, you and your spouse will retain the accountant or financial expert jointly, but more often than not, as the business owner you want control of this process because determining value requires a full, invasive look at your business.
It requires an outside, impartial expert to look at the assets and liabilities, cash flow, good will, brand recognition, and other financial metrics of the company to determine the fair market value. Sometimes this is particularly difficult if it is a family business or unique business arrangement. Just as your business is required to open its financial records for an auditor, during the divorce process you will be obligated to do the same.
Your divorce attorney should also be knowledgeable about this process and understand the specifics of valuing a company. It is essential that your attorney can communicate effectively with the expert hired to handle the valuing process, and participate in the conversation around valuation methods. How fair market value is determined and what is included in that process can have a huge impact on what happens to the business later in divorce proceedings. Your lawyer should also understand the value of the business to you personally and the importance of keeping the business intact. Hiring a divorce attorney with this specific experience in Oregon is essential.
Dividing a Business in Divorce
Business owners pour their heart and soul into building and growing a company. It can be a substantial loss to consider turning over part of your business to a spouse as part of a divorce, however Oregon’s marital property and division of property laws make this a possibility. If your business was started and built while you were married, it is going to be considered part of the marital property in Oregon, but even businesses started before your wedding day can be deemed marital property in some circumstances. Whether this determination means divorce affects business ownership is a slightly different question.
In Oregon, it’s possible that your spouse will receive interest in the business as part of the divorce, but that isn’t the sole option. Other assets can offset interest in the business or retaining sole interest can be negotiated through other concessions. In many instances, one spouse chooses to buy out his or her spouse, if both have an interest, or exchange equal assets to retain sole ownership. In other arrangements, a spouse may just request and receive cash distributions from the cash assets of the business or even obtain a partial interest.
Our attorneys at Gearing Rackner & McGrath specialize in divorces that involve closely held companies, family businesses, complex financial arrangements, and high asset divorces. We ensure you work with the right lawyer for your specific and unique considerations during a divorce, for the best possible outcome.