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Dividing a business in a divorce

On Behalf of | Aug 16, 2021 | Property Division

The property division stage of divorce requires the parties to list all their assets, separate any separate property from marital property and then divide the marital property according to state law. In Michigan, this means dividing the marital property in a way that is “equitable,” or fair.

Property division is rarely easy, but as a general rule, the more complex the assets, the more difficult the property division process. Splitting a checking account is relatively straightforward, but equitably dividing retirement accounts or stock options requires painstaking work.

Business valuation

Dividing a family business can be particularly difficult. If the spouses acquired the business together during the marriage, it is most likely considered marital property. If one of the spouses owned the business before the marriage, it could be considered separate property, but depending on the circumstances, a court may find the other spouse acquired some interest in the business during the marriage. In either case, before the parties can decide how to divide the business between them, they must first learn how much the business is worth.

There are two main ways of putting a value on a business in this situation. The first is for the parties to sell the business and divide the proceeds. If one spouse wants to hold on to the business, they must use the second option, which involves hiring a business valuation expert. The expert will analyze the business, its costs and profits, and compare it to similar business in the area. Once the expert determines a fair market value for the business, the parties can negotiate ways to divide that value along with the rest of the marital property.