Divorce can be a rather challenging endeavor under certain circumstances. For example, those who own complex, valuable resources may find that resolving property division matters is particularly difficult.
Business owners may have invested tens of thousands of dollars into the companies that they operate. They may also rely on the company as their primary source of income. The prospect of dividing ownership with a spouse or liquidating resources to provide them with a portion of its equity can leave business owners anxious about their finances and the solvency of the company after their divorce.
Oftentimes, they may seek to resolve matters amicably to better control the outcome and limit their divorce expenses. Business owners need to pay close attention to the requests made by a non-owner spouse, as they may be vulnerable to a double dip that can leave them at a financial disadvantage after their divorce.
What is a double dip?
Businesses are often at least partially marital property. Spouses may have to account for its value when making property division decisions. For a business owner to address what the company is worth, they have to perform a business valuation.
They may do this on their own with the help of their lawyer or may bring in a professional to assist with that process. There are multiple different business valuation models that people use in different circumstances. Some of those valuation models integrate the future income of the business into the value set for the company.
Their spouse may also request alimony based on their future earning potential. However, their earning potential stems from the revenue generated by the organization that they own. In other words, the non-owner spouse has integrated the future income of the company into two different economic claims.
The business owner may end up granting them more property and financial support than they need to, given the reality of their circumstances. In scenarios where the valuation model utilized integrates the future revenue generated by the business, addressing a spouse’s future earning potential elsewhere in the financial discussions of the divorce may be unfair and inappropriate.
Business owners need to make sure that they employ an effective right valuation model and that they push for a fair outcome in complex property division proceedings. Ultimately, learning about double dips and other business complications can be beneficial for those who own and operate companies as they prepare for divorce.
