The division of debts and assets is part of any divorce. When a couple has little to divide, that portion of the divorce process should not be complicated nor costly. When assets are complex and/or high value, however, the division of those assets can take up a significant amount of time and money during a divorce. This is even more applicable when a business is involved. As a Murfreesboro divorce attorney at Bennett, Michael & Hornsby explains, you may need a Business Evaluation Expert if there is a business involved in your divorce.
Division of Debts and Assets
In a Tennessee divorce, marital assets and debts must be divided in an “equitable” manner. That does not mean they must be split 50-50 but that the division must be a fair one. Moreover, only marital assets are subject to division in a divorce. When a business is involved, the first hurdle is often deciding if the business is a marital asset or separate property. As a rule, assets owned prior to the marriage are separate property; however, if that asset is co-mingled (as often occurs with a business) it can be converted into marital property. Assuming that the business is determined to be marital property, the next step is usually to value the business. Obtaining a professional valuation can be costly – easily exceeding $10,000 for a medium to large business — so if the business is relatively small it may not be worth securing an expert to provide a professional valuation.
Hiring a Business Valuation Expert
If the revenue, or apparent value, of the business warrants a professional valuation you will need to hire a Business Valuation Expert (BVE). This is a financial professional who will review and analyze the business information and provide a detailed opinion regarding the value of the business. A typical BVE is a Certified Public Accountant who holds an advanced accounting degree and has extensive experience in the field of forensic accounting.
How Does a Business Valuation Expert Arrive at a Value?
It is important to understand that a professional valuation of your business conducted by a BVE is not the same as an appraisal or profit and loss statement you might have prepared for a loan application or for investors. When a BVE is hired to provide a value, he/she will collect data from a wide range of sources, including, but not limited to bank account records, payroll records, spreadsheets and tax returns. Interviews will also likely be conducted with the owner(s) of the business and anyone else necessary to prepare an accurate valuation. Because the Business Valuation Expert is hired by your attorney, he/she will be asked to determine what your interest in the business is worth and/or what the value of the business is in general in order to determine what your compensation should be in the divorce.
Child and Spousal Support
Obtaining a fair and accurate valuation of a business in a divorce can also be crucial to determining issues involving the support and maintenance of minor children and/or spousal support. This can be particularly relevant if one spouse has actively operated the business while the other spouse has supported the business by staying home with the children and working inside the family home. Deciding what the stay-at-home spouse is entitled to can become tricky, however, because once that “partnership” dissolves the stay at home spouse is no longer assuming the risks associated with running the business. The question then becomes what (if any) portion of future profits should he/she receive? If valuing a business for the purposes of a divorce sounds confusing that is because it is. Hiring the right expert to conduct the valuation is crucial to ensuring that you receive and/or pay what you should for your interest in the business during a divorce.
Contact a Murfreesboro Divorce Attorney
If you have additional questions about divorce in Tennessee, it is important that you consult with an experienced Murfreesboro divorce lawyer to ensure that your rights are protected throughout the divorce process. Contact the team at Bennett, Michael & Hornsby as soon as possible by calling 615-898-1560 to schedule your free appointment.