How does business liquidity impact a divorce settlement?

On Behalf of | Apr 26, 2022 | Family Law

The business you own is a consideration in the property division portion of your divorce unless you have made prior arrangements. In most cases, you will need to figure out how to divide its value between you and your spouse.

To do this, you will either have to split the business with your spouse, sell it and split the profit, or buy out your spouse’s half. Regardless of which option you choose, National Law Review explains you will need to figure out the liquified value of your business.

Liquified value

Liquifying refers to turning an asset into cash. The cash value of your business will come in handy when you try to figure out what half of its value is or if you want to sell the business.

Potential issue

One of the most common issues with liquifying business assets is that some assets do not have a clear monetary value. For example, if your business relies heavily on your knowledge, skills, or education, it may not have that many actual assets you can liquify. You are not a liquefiable asset, and without you, the business may not be worth much.

Solution

If your business relies heavily on you to operate, you may not be able to sell it or co-own it with your spouse. In that situation, your best option is to buy out your spouse. You can get a professional to appraise the business to figure out the value. You can then either pay your spouse or negotiate other marital assets for his or her portion of the business.

You and your spouse may have to reach an agreed-upon value for your business if you cannot figure out an actual value for the assets. This will be what the court uses when figuring property division details.