Business Owner Divorce in Overland Park

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A divorce can add additional stress and complexity to a business owner’s life. There are various things to consider, such as the values of the business and property. On top of this, the owner will understandably be concerned about the well-being of the business, its employees, and its customers during the divorce and moving forward.

We understand the challenges business owners face when their marriages come to an end. That’s why we work hard to advocate for their best interests each step of the way, with a personalized legal strategy and effective representation from start to finish. If you are a business owner who is facing divorce, turn to Joseph, Hollander & Craft.

Why Owning a Business Complicates Divorce in Overland Park

Any property that a married couple accumulates during their marriage is subject to equitable division at the time of their divorce, and that includes business property. Compared to other assets, owning a business can uniquely complicate an already difficult divorce process. These are a few issues to be mindful of if you or your spouse owns a company:

• Determining the value of the company: The spouses may not agree on a valuation method or the findings of an appraiser. You may need to consult expert witnesses to help you arrive at a fair value of the business.
• Business debts: Property division entails the division of marital debts as well as assets. The amount of these debts and whether either spouse is personally liable for any of them could be a factor in the divorce.
• Separate versus marital property: This issue arises when the company was started by either spouse before the marriage. The court must determine how much of the business is marital versus separate.
• Disagreement over the spouses’ respective inputs: The spouse who owns and operates the business may try to claim their efforts primarily produced its success.
• Hidden assets and unreported income: If one spouse exercises disproportionate control of the business and its records, the other may allege hidden assets and unreported income.
• Interests of others: If you are the business owner, you have more than your spouse to worry about. You also need to consider the concerns of your employees, customers, and investors.
• Emotional complexities of a family business: Addressing the value of a family business adds another layer of emotional strain on what may already be a high-conflict divorce. Mediation or litigation may be needed to handle the matter.
• Tax considerations: The division of business assets during a divorce could trigger tax liabilities that you need to know about early.

How Will the Value of the Business Be Determined?

Out of all the above matters, the valuation of the business is usually one of the most contentious. Aside from your house, your business could be the most significant asset you own. Arriving at a fair calculation of its value is therefore a key step in your divorce.

There are various alternatives for determining what the company is worth, including:

• Asset-based valuation: This approach looks at what the business owns and subtracts what it owes, so it is best for businesses with more tangible property, but it may not be optimal for companies that lean heavily on intangibles like intellectual property, brand recognition, and client or customer relationships.
• Income-based valuation: Using this strategy requires projecting future earnings and determining the present value of the company. There are assumptions built into this approach pertaining to market conditions, competition, and whether the owner will continue running the company.
• Market-based valuation: A market-based company valuation examines the sale of other, similar businesses and then uses that information to calculate a reasonable value for the business at issue in the divorce. However, market-based valuations do not work as well for businesses that sell a unique or uncommon product or service.

Should You Mediate or Litigate?

Many divorces can be resolved through mediation, and this may be the most advantageous approach to handling your property division (including the business) because divorce is simply bad for business. The added publicity of court proceedings could threaten your bottom line and depress company morale. For this reason, business owners often choose mediation to dispel any confidentiality concerns.

However, there is no guarantee your spouse will be receptive to mediation. Allegations of hidden assets, disputes over the spouses’ roles in the company, and the emotional facets of the divorce could necessitate litigation. We will use mediation where it is most effective, but we are not afraid to take a matter to court if needed.

Possible Options for Dividing a Business

Whether in mediation or through litigation, you do have options for how best to dispense with the business and achieve a fair outcome to this phase of your divorce. Talk to your lawyer about the following:

• Buyout: A buyout is the cleanest way to divide a business. The owner spouse essentially offers cash or some other marital asset to the non-owner spouse to offset their interest in the business, which allows the company to continue operating with minimal disruption.
• Continued income from the business: If a buyout is not feasible, the owner spouse may promise an ongoing share of business income to the non-owner spouse for some period of time. This income may be in addition to or instead of alimony.
• Sell the business: Depending on the nature of the company, it may be best to sell it, liquidate its assets, and then split the proceeds between the spouses. The viability of this option will also depend, of course, on whether the owner-spouse wants to keep the business.
• Co-ownership: Ex-spouses can agree to continue running the business together after they get divorced. Doing so will require a strong commitment to the company’s success and an amicable working relationship between the spouses.

Regardless of the approach that you and your spouse take, the division of the business will take time. It may also require the assistance of expert witnesses like forensic accountants, appraisers, and others. These experts often testify in court or in depositions about the value of family businesses and various matters related to their assets and operations.

If You’re a Divorcing Business Owner in Overland Park, Let Us Help

Joseph, Hollander & Craft is here to explore all options for handling the division of your business during your divorce. Get started today by calling us or completing our online contact form. Our office is at 10104 W 105th St, Overland Park, KS 66212, and we have offices in Kansas City, Lawrence, Topeka, and Wichita.