Marital property law and the business

The division of assets during a divorce is largely determined by marital property law, which dictates whether and how the business is included in the settlement:

• Community of property (before 2018): If you were married before January 1, 2018, without a prenuptial agreement, all assets, including the business, fall under community of property. This means the value of the business is split equally upon divorce.
• Limited community of property (from 2018): For marriages after January 1, 2018, only shared assets and debts are divided. Private assets, such as a business started before the marriage, remain excluded. However, any increase in value during the marriage may be considered.
• Prenuptial agreements: If a prenuptial agreement exists, it often specifies what does and does not belong to the joint assets. This can mean the business is entirely excluded, though this depends on the exact terms of the agreement.

In divorces involving a business, understanding the rules applicable to your situation is crucial. As a mediator, I guide you step-by-step through this complex process. If necessary, I collaborate with financial planners or tax specialists to ensure an appropriate division.

Emotional and Financial Challenges

Divorce is not just about numbers and paperwork—it is also deeply emotional. The loss of a familiar structure and uncertainty about the future can weigh heavily. Nonetheless, it is important to handle the financial and legal aspects properly, especially when a business is involved. Key topics include:

• Child support: Costs for children must be divided based on financial capacity, aiming to minimize the financial impact of the divorce on the children. For entrepreneurs, calculating capacity can be challenging due to fluctuating income.
• Spousal support: This provides financial assistance to the ex-partner after the divorce. The amount and duration are determined by the income gap and the capacity of both parties. For entrepreneurs, factors like variable income and business performance significantly influence calculations.

Division of assets and debts

When dividing a business, several critical questions arise:

• How do you determine the value of the business?
• What happens if the partner has worked in the business for years without formal compensation?
• How do you handle situations where one partner cannot afford to buy out the other?

Accurate valuation and a clear financial plan are essential to reach a fair outcome. I assist you in creating a workable solution that respects the interests of both the entrepreneur and the ex-partner.

The Complexity of Valuation

Valuing a business is often one of the most complex aspects of divorce. It involves not just reviewing current revenue but also estimating future profitability and mapping out liabilities. Personal goodwill and the equity built up in the business may also play significant roles. An independent expert may be required to ensure an objective valuation.

Professional help for divorce involving a business

When a business is part of a divorce, it is wise to seek expert assistance. As a family mediator, I help you find tailored solutions, from understanding the legal framework to making practical agreements about the division of the business. Tax implications, such as deductions and other financial consequences, are also addressed in the process.

Divorce always brings change. But with proper preparation and guidance, we ensure that both parties know where they stand and, if possible, secure the future of the business.

Documents

• Code of conduct for mediators
• Standard agreement
• Complaints procedure