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What does divorce mean for your small business?

On Behalf of | Apr 1, 2020 | Divorce

The end of your marriage will change many things about your life, including your finances. The property division process affects your long-term savings, the physical property you own with your spouse and your small business. If you own and operate a closely held business, one of your main concerns during this process may be to protect this asset and ensure operations for years to come.

If you started this business after you were married or with your spouse, it is likely your small business is marital property. This means it could be subject to division in your divorce, but that doesn’t mean you have to give it up or that your business will close. Through negotiations and a reasonable property division settlement, it is possible that your small business can continue to succeed for years to come.

The value of your company

One of the most important aspects of dealing with your small business fairly during your divorce is establishing its value. An accurate valuation will ensure that you can negotiate fair terms and reduce the chance of future complications. There are a few ways to determine exactly how much the company is worth, including:

  • Income-based valuation – This method determines a value for a business by looking at how much income and revenue it brings in. This is an appropriate method for companies that don’t have many physical assets.
  • Asset-based valuation – This method looks at the value of the physical assets owned by a business, such as fixtures, real estate and furniture. This method is ideal for retail and manufacturing companies.

In your divorce, you may opt to buy out your spouse’s share of the company, or you may offer other assets or a lump-sum in lieu of compromising how your business operates. The right choice depends on the nature of your business and your long-term goals.

Don’t negotiate alone

A small business is one of the most complex assets to address in a divorce. This is why you will find it beneficial to work with an experienced Colorado attorney who can help you protect your future interests and preserve your company’s ability to continue operating. Before you make any decisions or accept an offer that could affect your financial well-being, you may find it helpful to seek an assessment of your case and explanation of your options.

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