In case of divorce, the decision on who receives ownership of a family-owned or privately held business will depend on various factors. One of the most complicated facets of the dissolution of a marriage is the division of assets, particularly when it comes to the division of business property that one spouse has worked hard to build.
If you are facing a divorce, you need the assistance of experienced Auburn family law attorneys who can help you understand the aspects that may affect the decision of the court in your case. The attorneys at Alsobrook Law Group will work hard to protect your business interests and advocate on your behalf. Contact us today for a personalized consultation.
The Distribution of Business Assets in an Auburn, AL Divorce
The rule of “equitable distribution” applies in Alabama. This rule dictates that the court divides a couple’s assets, including one or more businesses, equitably but not necessarily equally. If the divorcing spouses agree on the division of their business interests, they can present that agreement in court for a final review and approval, eliminating the need for expensive and prolonged litigation.
Below are three scenarios that often occur during the division of a business in an Auburn, AL divorce:
The spouse with greater involvement is given the business while the other party is equitably compensated.
A judge can order the sale of the business with the proceeds divided between the spouses.
Both parties continue to co-own and run the business together.
As it is most probable that a court will award the business to one spouse, the consequent issue in such cases is how to compensate the other party for their share of the business. To this end, the court will need to assess the value of the business that is being awarded to one spouse.
Business Asset and Debt Valuation in an Auburn, AL Divorce
An expert valuator, or business appraiser will typically evaluate each party’s stake in the enterprise. The valuator may consider various factors to achieve a comprehensive appraisal, such as whether the company is closely held, the industry it operates in, its annual financial disclosures, cash flow, and the value of similar companies in the same industry with similar management. Depending on the specificities of your case, the financial expert will choose the most appropriate valuation methodology to reach their final figure.
Additional Circumstances that Could Affect the Court’s Decision
After reviewing the documentation and evidence presented by both parties, including any valuation from financial experts, the Auburn family court will assess some additional factors to determine the most equitable division of a divorcing couple’s company. The court’s decision could be significantly affected by the degree of each spouse’s involvement in the business’s daily functioning as well as the spouse’s role in building the business.
Also, the court may evaluate either party’s contribution to the outstanding liabilities of the business, and both parties’ income, needs, assets, and prospects for future employment. In some cases, one party may not have been actively involved in business operations due to the responsibility of being the primary caretaker of the children. The court will take such factors into account when establishing whether and to what degree the other spouse will have an interest in the enterprise.
If both spouses have substantial involvement in the day-to-day activities of the business, the court may still award the enterprise to one party or have the spouses continue to co-own and run the business.
Sale of the Business
In more limited cases, the court may order the business to be sold. Such an order is likely if: a) neither party wants the business, or b) one or both spouses want the business, but assets and income of the business are insufficient to fairly compensate the spouse who would no longer be part owner. In general, the court would not favor a forced sale of a profitable business enterprise. However, in certain situations, they might see this as the only solution.
In case the spouses have a sound relationship that will survive a divorce, they will likely be able to resolve the property matters in an out-of-court settlement through mediation or other means.
Concealed Business Income or Assets
Sometimes a spouse may take measures to conceal business income or assets. They may try to show the enterprise at a depreciated value. In addition, it may be vital to audit certain records in a thorough manner.
It is especially important to secure an accurate business valuation when one party is relying on the valuation to receive an equitable share of other property to compensate the business being awarded to the other partner. After the valuation of the business, the spouse who is made to leave the business will be awarded a more substantial share of other assets to compensate for their marital share of the business.
Consult a Skilled Auburn, AL Lawyer if you are a Business Owner Facing Divorce
If you are concerned about the future of your business after a divorce, it is a good idea to consult with an experienced attorney. The Alsobrook Law Group can advocate for your best interests and guide you on how to pursue an equitable division of your business. To schedule a free consultation with a qualified attorney, call today at (334) 737-3718.