If you are facing a South Carolina divorce as a business owner, you may have already encountered the painful reality of equitable division. Equitable division refers to the process of splitting up a couple's marital assets and debts. This means that bank accounts, stocks and bonds, retirement accounts, cars, houses, and even furnishings and other personal property must be divided between the parties as part of the divorce. What some people may not realize is that small businesses (and large ones, too) are also subject to equitable division, and dividing a business in a divorce requires special attention and an experienced legal team of professionals to make sure your interests are protected. Below are some of the questions that may be running through your mind:
Does my divorce mean my spouse owns half of my business?
One of the issues that can cause confusion when a business owner goes through a divorce is that many times, the business is owned solely by one spouse. In other words, prior to divorce, the other spouse does not have any ownership interest in the company. So does divorce suddenly grant your spouse half of the business you worked long and hard to build? Not exactly.
Your spouse who does not own the business does not immediately become a “co-owner” during a divorce. However, your spouse may have an interest in the business due to the fact that the value of the business was created (or increased) during the course of the marriage. The marital "equity" in the business must be taken into consideration like all of the other assets, and the spouse who owns the business is typically responsible for compensating the other party for the value of that interest.
How do we split the business?
Rather than granting your spouse a share of the business, many people prefer to simply "buy out" the value of the other party's interest. To do this, it is necessary to hire business valuation experts to value the company and then determine your spouse's share of that value. There are several methods for compensating your spouse without actually granting your spouse a share in the business which you will need to discuss with a family law attorney experienced in working with business valuators and who understands how South Carolina divorce laws affect the facts of your particular situation.
How do we value the business appropriately and fairly?
Though businesses are valued using standard accounting practices, the process can sometimes become contentious, given that you and your spouse may disagree greatly about the true worth of a company, particularly more valuable businesses. Though the spouse who owns the business might feel like he or she knows best what the company is worth, it's often the case that an expert will need to be hired to provide an impartial or objective estimate of the value of the company. This process requires reviewing the business' books, other accounting records, logging records on inventory, and determining the goodwill put into the business by the owner, among many other factors. Working with an experienced family law team who has handled many of these cases is the best way to ensure that the experts have the most accurate data available to them. Your legal team should also be experienced in arguing against any evidence presented by the other side which may misconstrue the true value of the business because, unless you and your spouse are able to agree on the value produced by the hired expert, the Family Court judge will ultimately decide what the business is worth and what happens to it.
How do you find an attorney familiar with business issues?
Not all divorce attorneys are competent to handle cases involving business valuations – in fact, many attorneys who advertise that they handle family law cases are far from it. Valuing medical practices, family businesses, law firms, or other companies is a complex process, and there are many ways that an inexperienced attorney can actually harm your case and put your interests at risk. The old saying is true in these types of cases: "What you don't know, really can hurt you!" Ben Stevens is a Fellow of the prestigious American Academy of Matrimonial Lawyers, and he has an undergraduate degree in financial management with a minor in accounting. He has handled many complex divorce cases and worked with business valuation experts all across South Carolina. He and his team are experienced in effectively gathering and preserving evidence for trial providing rebuttal opinions and crafting cross-examinations to mitigate the effect of opposing experts in these complicated cases.
If you or your spouse have an interest in a business or professional practice, request a consultation with Ben by calling (864) 598-9172 to discuss your divorce or separation case before it's too late to undo the damage.