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Do those with a business have to worry about divorce double dips?

On Behalf of | Jun 8, 2023 | Divorce

A business started during a marriage will typically be classified as marital property, which means that spouses will be required to report its value and add that value to their marital estate in order to appropriately divide their shared property. For those who inherited a company or started a successful business prior to marriage, preserving the organization during divorce is often their main objective.

Those who are hoping to retain sole ownership and managerial control over a business will typically need to determine what the value of the business is and how much of that value can rightfully be considered marital property. They will then either need to negotiate a settlement with their spouse or wait for a judge to rule on the division of their marital estate. Especially if someone has a dependent or lower-earning spouse, they may need to watch carefully for the possibility of a double dip during property division and alimony considerations.

What constitutes a double dip for a divorcing business owner?

The process of putting a value on a business is complex and requires looking at the company’s assets and obligations, as well as the depreciation of any physical property that the company owns. The future company revenue will factor into the valuation of the business, as the income it generates may be the most valuable thing about the company.

Some spouses trying to maximize what they get when divorcing a business owner will request their share of the business’s value in property division and then will go on to claim that future income again as justification for requesting alimony. It is possible for business owners to put themselves in an unfavorable situation where they end up conceding far more to their spouse than they planned to because they agree to terms that factor in their future income from the business more than once.

When discussing financial matters as a business owner preparing for divorce, reviewing the details at every stage and having appropriate legal support is of the utmost importance. Individuals could easily make mistakes that cost them thousands when trying to settle property division and alimony matters to keep their divorce proceedings out of family court. Learning more about the common mistakes that occur during divorce for business owners can help individuals who are hoping to protect their businesses and minimize financial losses created by their divorce.

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