Tips for dividing a business in a divorce

When Georgia entrepreneurs get a divorce, they might wonder how their business will be affected. Because the business is an asset like any other, the first step will be to determine its value.

This will likely require a professional appraiser. An appraiser looks at all aspects of the business and not just the financials. This may include examining the value of equipment and real estate, accounting for the future income potential of the company and assessing the value of the company’s name. An appraiser also must look closely at financial documents to ensure they are all in order. An owner might try to hide the profits or inflate the expenses to make the business appear to be worth less than it is.

When the value of the business is determined, the couple must decide whether it will be kept or sold. If there are other owners, there might be a cross-purchase agreement in place that addresses what happens if one person leaves the company. If one spouse pays cash to the other for a share of the business, there could be tax implications. If one spouse pays the other with a promissory note, there should be collateral to back it up. The promissory note should also be for as short a time frame as possible.

There may be complexities with dividing other types of assets as well. For example, one person might want to keep the home, but it is important for people to realize that there are costs such as taxes, upkeep and insurance associated with it. Some types of retirement accounts and pension plans must be divided in a certain way to avoid taxes. There could be taxes on other assets sold as part of the divorce as well. People should be aware of these expenses as they are negotiating a property settlement.