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What happens when business owners in Phoenix divorce?

Many married entrepreneurs in Phoenix have started a business from the ground up. Some of these couples have achieved great financial success in their endeavors, and, therefore, one of their most valuable assets is the business itself. Unfortunately, just because a couple's business has seen financial success does not always mean that their marriage will be equally successful. And, should they decide to divorce, they must face the question about what to do with their business.

Some couples have had the foresight to execute a prenuptial agreement prior to getting married that addresses how the business would be divided in the event of divorce. However, there are steps divorcing business owners can take even if they never entered into a prenuptial agreement.

For example, each party should assess how involved they are in the operations of the business. If one spouse is not very involved in the business, they may not have as much of a right to the business's value than the spouse who is heavily involved in the business. If a business owner is contemplating divorce, he or she may want to start documenting his or her spouse's involvement in the business.

In addition, couples should take a moment to go over their options when it comes to restricting ownership and transferring ownership. This can be done through a buy-sell agreement or a living trust. If there are partners outside the marriage, some partnership agreements include provisions in which the other partners have the ability to buy out the divorcing partner's interest in the business.

Once the decision to divorce is made, business valuation must take place. Sometimes this can be done rather informally, if each spouse can come to an agreement on what the business is worth. Alternatively, couples can use the "book value" of their business, as provided by an accountant. Forensic accountants are also able to assess a business's fair market value.

As this shows, determining what to do with one's business is just one complexity found in many instances of a high-asset divorce. Business owners who are seeking a divorce should make sure they seek the help they need if they would like a fair and appropriate outcome to be reached with regards to their business and their divorce.

Source: Inc., "How to Protect Your Business in Divorce," Rosanne DeTorres, Esq., May 25, 2017

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