Business owners pour thousands of dollars in savings and work tirelessly to ensure that their business is a success. In some cases, married couples own the business together, but sometimes, only one spouse runs the show. In any case, when it comes for a divorce, it can be difficult to figure out what to do with the business. A family law attorney specializing in high asset divorce can help you with every step of the process.
Marital or Separate Property?
The first step is often determining whether the business is a marital asset or separate property. Colorado is an equitable distribution state, meaning that judges can use their discretion to decide how to divide up the marital assets fairly and equitably. In order to determine whether a business is a marital asset, courts will consider:
- How the business was initially funded
- Whether one spouse owned interest to the business before marriage
- Whether marital funds were used to contribute to the business
- How much each spouse contributed to the business
Valuation of the Business Interest
Once the business has been classified as either marital or separate property, the divorcing couple will need to determine the value of the business interest. There are three main approaches used to value a business:
- The asset approach
- The market approach
- The income approach
Spouses may not agree on the valuation of the business and may hire their own experts to conduct the valuation. If the experts do not agree, a judge may review both valuations and determine which is more credible.
Options for Dividing up the Business Interest
Once the business has been deemed a marital asset and has been valued, couples have a few options when it comes to dividing up the business interest. Here are some potential options:
- One spouse can buy out the other by purchasing the other’s interest in the business.
- The spouses can sell the business and divide the proceeds.
- Spouses can continue to co-own the business, even after the divorce is finalized.
Deciding which option is best for you can be challenging, as each option has its own pros and cons. Consulting with an attorney who specializes in these matters can help you make the right decision.