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The Financial and Personal Effect of Divorce on Your BusinessKeeping your business separate from your marriage is difficult to accomplish when you are getting a divorce. There are many ways that your business can become part of your marital property, whether you:

  • Started the business during your marriage
  • Grew the business’s value during your marriage
  • Invested marital money into your business
  • Mingled your business properties with your marital properties

For many small business owners, their spouses may be involved in the business as either an employee or part owner. A divorce can affect your business’s finances and your working relationship with employees and partners. However, you can minimize any negative impact on your business with the help of a divorce attorney.

Financial Effect

When your business is marital property, it means that your spouse can claim an equitable share in the business. If you already co-own the business with a partner, losing a portion of your ownership in the business could change your power dynamic with your business partner. Having a new co-owner could also be disruptive to your business, whether it is your former spouse or someone else they sold their ownership stake to.

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Three Business Valuation Methods for Your DivorceIf you are a business owner who is getting divorced, you will need to conduct a professional valuation of your business. A business is a marital property if you started or purchased it during your marriage. Even if you have owned the business since before you were married, it may have become marital property because you invested personal assets into it. Business valuations are complicated because there are multiple approaches to valuation and several aspects of a business that you must consider when calculating its value. There are three general approaches to business valuation, each with their own strengths:

  1. Income-Based Approach: The most popular method of business valuation, this approach values a business based on the earnings that it is able to generate. The business appraiser looks at the business’s past earnings and projects the future earnings, based on trends and accounting for risks.
  2. Asset-Based Approach: The appraiser bases the value of the business on the value of its assets. The appraiser comes to a total by either subtracting the value of the business’s liabilities from the value of its assets or estimating the amount of money the business would receive if it liquidated all of its assets. This approach requires appraising the value of tangible and intangible assets.
  3. Market Value Approach: Taking an approach that is similar to real estate, the appraiser looks at similar businesses that were recently sold to see what those owners received in their sales. This method relies on being able to find multiple examples of businesses that are strongly comparable to the business being valued.

Challenges for Small Business Owners

The business valuation process may be more complex if you are the owner of a small business. Appraisers must consider the goodwill value of small businesses because some of the business’s value is based on the owner’s reputation and would be lost if the business was sold. The owner may use their personal assets for their business, and the appraiser needs to separate the personal assets from the business assets. For the market value approach, it is more difficult to find sales involving comparable small businesses.

Contact a St. Charles, Illinois, Divorce Lawyer

Determining the value of your business may require a mixture of valuation approaches, depending on the type of business you own. Fortunately, you do not need to worry about searching for an appraiser. A Kane County divorce attorney at Goostree Law Group regularly works with business appraisers and can recommend one for your case. To schedule a free consultation, call 630-584-4800.

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Costly Mistakes to Avoid in a High Asset DivorceA couple in a high asset divorce has more at stake in the division of property – and more to lose if they make a mistake. A poorly conceived divorce agreement could cost you a small fortune in lost or squandered assets. Once the agreement is approved, you will not get a do-over unless you can prove that your spouse intentionally deceived you during your divorce or you signed the agreement under duress. To avoid having remorse over your high asset divorce, you should do your best to get your agreement right the first time.

Dig Deep

The main way that a high asset divorce is different from other divorces is the number and variety of marital properties. You need to thoroughly investigate your spouse’s finances to see whether there are hidden assets, such as:

  • Undisclosed bank accounts
  • Marital assets within a business
  • Business assets purchased with marital money
  • Secret retirement accounts
  • Secret collections of luxury items
  • Undisclosed real estate
  • Marital assets being loaned to a friend

It is fraudulent for your spouse to hide marital assets if your spouse is actively trying to deceive you. Your spouse might not be at fault if you overlook assets that a reasonable investigation would have discovered.

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Cryptocurrency Difficult to Find, Value During DivorceMarital assets in a divorce can be intangible properties that hold great value, particularly in a high-asset divorce. Cryptocurrencies, such as Bitcoin, are a modern example of an intangible financial asset. Most divorces do not have cryptocurrencies because owners typically must have a combination of technological savvy and individual wealth. The value of one Bitcoin has hovered around $10,000 for the past few months. Owning cryptocurrency can make the division of property more complicated. You may need to hire a financial professional with knowledge of cryptocurrency and how it applies to divorce laws.

Hidden Asset

Cryptocurrencies are a decentralized and unregulated form of digital currency that originated in the past decade. The lack of a central bank or government oversight creates the risk that a divorcee could hide part of their assets by:

  • Using them to purchase cryptocurrency; and
  • Hiding the cryptocurrency in hard-to-find accounts.

You can trace most cryptocurrency transactions through digital records, but doing so may require a forensic accountant with experience investigating digital transactions. A divorcee may be able to cover their tracks by conducting transactions in person and erasing the digital evidence. Finding cryptocurrency during a divorce may continue to be a problem until there are greater regulations on the market.

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Amazon CEO Shows Divorce Can Be Amicable Despite Valuable AssetsAmazon CEO Jeff Bezos recently announced the terms of his divorce from his wife of 25 years, MacKenzie. The divorce is expected to be the most valuable in history because Bezos’s net worth of more than $110 billion makes him the richest man in the world. As part of the divorce:

  • Jeff Bezos will keep 75 percent of the couple’s stock in Amazon and voting control for all of their stock;
  • MacKenzie Bezos’s share will be about four percent of Amazon’s total stock, valued at $35 billion; and
  • Jeff Bezos will receive all of the couple’s interest in the Washington Post and Blue Origin.

As a result of the divorce, MacKenzie Bezos will be the third-richest woman in the world. As astounding as the details of the agreement are, it may be just as impressive that the divorce has been amicable. The couple reached a quick agreement and has complimented each other publicly throughout the process. You could argue that it is easy to cooperate when both spouses are guaranteed to still be amongst the richest people in the world. However, a high asset divorce can just as easily create conflict between the spouses.

The Stakes

You likely worked hard to accumulate the wealth and assets that you share with your spouse. It is natural to want to keep as many of those assets as possible. A divorce is meant to provide financial stability to both spouses. This may mean:

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