Mitigating the Risks of Business Depreciation During High Asset Divorces

Mitigating the Risks of Business Depreciation During High Asset Divorces

When a couple owns a business together, protecting that business during a divorce can be a top priority. It’s not uncommon for businesses to be negatively affected during a divorce. Stockholders worry about the future of the company, are uncertain about whether a massive stock transfer will affect the company’s value, and wonder if consumers will follow the company on its new path. A business’s value tanking during a divorce can make it incredibly hard to divide it fairly and leave both parties without the assets they need to move forward.

As you navigate divorce in Charleston, it’s important to work with a legal team you trust. Call Pence Law Firm at 304-345-7250 to set up a time to talk to our experienced team.

Valuation Strategies for Business Assets

It’s important to get a fair valuation of a business as part of your divorce. This ensures that the business is divided equitably and helps you verify that your efforts to protect the business’s value are successful. There are several different strategies you may consider.

Some couples opt to go for the market value of the business. This involves looking at what the business would sell for on the open market. This is in comparison to the book value method, which is what shareholders would get if the company’s assets were liquidated and debts paid off.

Another option that may make sense is income-based valuation. Income-based valuation can be fairly complex, as it looks at the company’s earnings and applies factors like amortization, depreciation, and taxes.

Regardless of which option seems to make the most sense for your needs, it’s important to work with a financial professional.

Protecting Your Business and its Assets

There are different ways that individuals can protect their business assets in the event of a divorce. Unfortunately, most of these methods rely on premarital or at least pre-divorce planning. Once you’ve reached the point of divorce, your options have already decreased significantly.

Prenuptial and postnuptial agreements are obviously useful in this situation. If one party owned the company prior to the marriage, a prenup or postnup may ensure that the business stays with them after a divorce.

Buy-sell agreements are another way to plan for divorce before a split actually happens. They lay the groundwork for how the business will be handled if the marriage ends. This takes a lot of guesswork out of the equation; should the couple decide to divorce, the terms of the buy-sell agreement simply go into effect.

If you did not make any sort of legal agreement before deciding on divorce, protecting your business assets may be more complicated. In these situations, it’s important to work with a high-net-worth in Charleston. They understand the factors at play and can provide different solutions that allow you to keep the business safe and growing.

Continuity Planning During Divorce

While navigating your divorce, you’ll also need to engage in continuity planning that secures the future of the business. Clear protocols regarding day-to-day operations ensure that important tasks do not fall by the wayside as the owners handle their personal issues. A contingency plan may name people to take on the owners’ daily tasks when personal issues arise.

You can also plan for the future success of the business by carefully handling how the divorce is announced and handled. A couple should decide when and how to announce their divorce, rather than letting the media get a hold of the news and control the narrative. This gives them the chance to present a united front, calm shareholders’ worries, and clarify the future direction of the company.

In the time between deciding to divorce and announcing the divorce, the couple can come up with their continuity plan. It can be difficult to work together under these circumstances, but remember that you both rely on the financial stability provided by the business—handling these matters together is best for everyone involved.

Facing Divorce? Choose the Pence Law Firm for Your Family Law Needs

As you prepare for your Charleston divorce, choose a legal team that you can rely on through the entire process. Call the Pence Law Firm at 304-345-7250 or fill out our online contact form to connect with a team member.