The U.S. economy thrives in no small part thanks to small businesses. Many of these enterprises are owned by married couples or by extended families. When spouses who have an interest in a small business divorce, addressing how that interest will be managed is often a complex undertaking.
In Georgia, the state’s approach to honoring the equitable distribution of marital assets tends to affect litigation when couples do not divorce amicably. It can also influence divorce negotiations when spouses attempt to reach an agreement out of court. This approach aims to craft divorce settlements that are fair. Therefore, if each spouse has an interest in a business – and how that business must be treated in the event of a divorce is not spelled out in a binding marital agreement – the courts will try to extend each spouse their fair share of that interest post-divorce.
What is a business truly worth?
Before interests in any business that is considered a marital asset can be addressed, the business at issue must be accurately valued. This is true even if the business was started before the marriage, as any increase in its value during the marriage may be considered a marital asset. By establishing an accurate value for the business, the court – or each spouse’s legal team during negotiations – can better ensure that both parties receive a fair share of this asset.
For example, if one spouse is awarded the ongoing ownership of the business, the other spouse may be entitled to compensation for their share of the business’s value. This compensation may manifest in the form of cash, other marital assets or a combination of both. Without an accurate business valuation, one spouse may receive less than their fair share of this asset, which could impact the fairness of the divorce settlement as a whole.
On the flip side, overvaluing the business could lead to the newly single business owner being required to pay more than they can afford to buy out the other spouse’s share, potentially impacting the business’s future.
At the end of the day, a proper valuation helps to ensure that both parties’ financial interests are protected during the divorce process and as life moves on.
