In any divorce, dividing the marital property and debt can be a complicated endeavor. The truth is that some parties can have martial assets of various kinds.
Many parties do not contemplate all the marital assets that might be in play in a divorce. Often, individuals just think of the marital home. But many parties have all kinds of assets from investment and retirement accounts, vehicles, bank accounts and personal items, like everything contained within the marital home.
One marital asset that can complicate divorce proceedings is when a party has business interests. Business interests are complicated because it is often hard to value what a business interest is worth in divorce.
One spouse might claim that the business interest has minimal value. The other spouse at the same time might claim the business interest has substantial value. How is this issue worked through in a collaborative divorce?
In a collaborative divorce, it is important to have the business interest valuated. This is typically accomplished through enlisting a financial neutral. If the financial neutral has the experience to value the business, the financial neutral might do so themselves.
In some instances, the financial neutral might enlist an outside business valuator. The outside business valuator might talk to the parties, examine various financial documents or conduct a site visit to come up with a determination of what the business interest is worth.
Some business might have assets that have significant value. Other business interests might not have assets, but it might have cash flow that provides the business interest value.
Ultimately, business valuators generally look at Internal Revenue Rule 59-60 and weigh the factors. The end-game is determining the fair market value? Put simply, what would a willing buyer pay for the business interest? If the business interest is a majority interest, it might have more value. But if the business interest is a minority interest, the value of the business interest could be significantly less.
Nonetheless, in collaborative divorce matters where there is a business interest, it is vital that the financial neutral coordinate having the interest valuated. This is often a significant issue in resolving a divorce in the collaborative process.
From there, the parties will have to decide whether the business interest is off-set against other marital assets in the property division. Conversely, it might be that the business interest is sold where there are not assets for an off-set. The exact division will obviously vary based on the facts of the case.