Are you a business owner contemplating divorce? Whether you and your spouse run your business together or it is a separate matter, it will need to be addressed in the divorce. So how do you fairly decide how to handle a company split? We asked Certified Public Accountant (CPA), Darren Hall, to walk us through some of the basics of this process.
Whether the business is run by a single spouse or both, Hall says it's important to remove your emotions from the process as best you can, and remember that this is now a business transaction.
“When you're at the point where you're facing a divorce, one of the main concerns is what's going to happen to the business. It could be that for a couple, it is their survival, it is their baby. It is what they have done, it is what they want to continue doing. And there are serious concerns that it will have to be sold or liquidated, or that it may not be kept because the other partner will have to be paid,” says Hall. “The first thing you need to do is remember that you are now at a point where the marriage is over and you are now looking at everything as a business transaction. So how are you going to get to the ultimate goal that you want, which is to keep your business, separate you from your spouse, get your spouse their share of the assets, and move on?"
The first and most important step in dividing a business in a divorce is determining the value of the business.
“If you look at real estate or a vehicle, it's easy to figure out how much it's worth. For most things, the value can be easily determined. For companies, it's much more difficult,” says Hall. “There is a whole group of professionals who deal with that; They are called Certified Valuation Analysts."
Hall explained that there are several methods certified valuation analysts can employ to help you determine the value of your business. Whichever method is used, once the process is complete, the divorcing spouses will need to decide how they want to divide their business, along with their other assets. Although state laws vary on how property is divided (for example, community property vs. equitable division), the general goal is for assets to be divided 50/50, or in a way that is considered fair and equitable.
“Often what happens is you'll have a house that's worth $500,000, some other small assets that aren't really significant, and then you'll have a business that's worth $2 million. And there's no way to do a fair split, because an asset is too big,” says Hall. "In that case, there is the option to sell the business to a third party and split the money, there is the option for one partner to buy the other spouse's interest, and the third option is for one spouse to get a larger share. of the asset than the other."
An important consideration that all business owners must take into account when negotiating the division of assets in a divorce, is the role that taxes will inevitably play.
“Una cosa clave que mucha gente se le olvida frecuentemente es que no es suficiente decir: 'Usted tiene un millón de dólares en activos y yo tengo un millón de dólares en activos'”, dice Hall. “Esto se debe a que los activos tienen algo que se llama base, y la base determina cuál será la tributación de esos activos cuando finalmente se vendan. Por lo tanto, todos los activos en un acuerdo de divorcio siempre deben ajustarse con impuestos a su valor después de impuestos ".
Cuando se le preguntó si es posible o prudente que los socios que se divorcian sigan siendo copropietarios de un negocio, Hall afirma que esta opción a veces puede ser beneficiosa para ambas partes, suponiendo que puedan continuar trabajando juntos con éxito.
“A veces puede ser muy beneficioso, desde el punto de vista fiscal, que los socios dividan la empresa y sigan siendo copropietarios. Como dije al principio, estás en el punto en el que tu matrimonio ha terminado. Debe eliminar la emoción y comenzar a verlo como una transacción comercial preguntando: '¿Cómo nos aseguramos de que cada uno de nosotros salga de esto lo mejor que podamos?' Y, la mayoría del tiempo, si ambos socios permanecen en el negocio, eso puede crear un resultado fenomenal debido a la transferencia de ingresos del contribuyente de mayores ingresos al contribuyente de menores ingresos, lo que puede resultar en algunos ahorros fiscales que pueden ser divididos por ambas partes”, dice Hall.
Although the process of deciding how to divide a business in a divorce is not simple, there are options available to both parties that can ensure a fair decision is made. If you are a business owner considering divorce, you can listen to Darren's full interview, where he discusses the details of the processes involved in evaluating and dividing a business, on our Modern Family Matters podcast.