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What happens to a business in a divorce

On Behalf of | Dec 26, 2018 | Divorce

When people get a divorce and one or both of them owns a business, there may be a complex process to decide what share of the business each person gets and what happens to the business. Since Arizona is a community property state, a business created after the marriage will usually be considered the property of both spouses. If the business was started before the marriage, there may be a more complicated issue of determining how much the company’s value has increased since the marriage began.

The first step will be to get an accurate valuation of the business. This should be done by someone who has been recommended by a trusted legal or financial professional or by someone associated with the American Society of Appraisers. The appraisal should take into account the value of any equipment and real estate holdings as well as the company’s reputation and other less tangible items. A family-run business may have some informal dealings that are more difficult to identify, and if the divorce is a contentious one, one person might attempt to hide or overstate the company’s value.

The next step is deciding whether to sell, keep or split the business. One person might buy out the other, or the business could be traded for another asset. There might already be an agreement in place for dealing with divorce.

One of the difficult elements of asset division is that some types of property, such as a business or the family home, carry strong emotional connotations for one or both people. This may make a legal and financial negotiation much more difficult. Attorneys may assist by conducting negotiations if people are having difficulty communicating. Litigation is also an option although it might mean that the judge makes a decision with which neither person is happy.