High Asset Divorce and the Family Business

 Posted on January 07, 2016 in Family Businesses

Although there is nearly always some overlap, most assets in a high net worth divorce fall into one of two general categories. Some property items, primarily things like securities brokerage accounts and retirement nest eggs, are prized mostly for their economic value. Others, such as a primary residence or vacation property, have a greater emotional value.

A family business is one of the rarer items that is very much a mixture of both these elements. In many cases, a business is a couple's primary source of income, or even the only such resource, so it has tremendous economic value for both the husband and wife. At the same time, especially if it was founded during the marriage, both parties have a great deal of "sweat equity" in the endeavor.

What Happens to the Business?

This question must always be answered, and there are several options in terms of the business' disposition.

• Co-Ownership: Some ex-spouses are able to set aside their differences between 9 and 5 and continue to work together. Needless to say, this option is not for everyone. As a very general rule of thumb, if the high-asset divorce was agreed, co-ownership may be an option.
• Sell and Divide: After the business' tangible and intangible assets are identified, categorized, and evaluated, all these assets are sold and the business ceases to function. This option is normally off the table if one or both partners have a significant emotional attachment to the enterprise.
• Buyout: This option effectively combines the previous two. If a cash buyout is not an option, many people consider a set off. For example, Husband might leave the business and take all the equity in the marital residence.

Valuing the Assets

In the second or third option, there is an additional three-step process to follow. First, assets must be identified. Some, like fixtures and accounts receivable, are fairly easy to find; others are more difficult. Second, the assets must be classified as separate or community property. For example, enterprise goodwill (McDonald's or Burger King) is typically a community asset, but individual goodwill (Joe's Barber Shop) is probably separate property. Finally, the asset must be assigned a dollar value.

For prompt assistance in this area, contact  an aggressive Round Rock high asset divorce lawyer. Call Powers and Kerr, PLLC at 512.610.6199 today.

Source:

http://www.journalofaccountancy.com/issues/2013/apr/20126248.html