For many business owners, the company feels like something they built themselves. They may have started it before marriage, grown it during the marriage or invested years of work into making it profitable. That history can become important when a divorce puts the couple’s finances under review.
Business owners should be ready to address these three issues.
1. Gather the business records
Start by collecting key financial and ownership records. These may include tax returns, bank statements, profit-and-loss statements, balance sheets and business formation documents. Records that show compensation and ownership can also help establish the company’s financial picture.
Business owners should keep personal and business expenses separate when possible. Clear records can help show which assets belong to the company and which may belong in the marital estate.
2. Prepare for a business valuation
A business can have value beyond the money in its bank accounts. Its equipment, property, income, contracts and future earning potential may all affect its value.
Michigan courts may consider a business’s value when dividing marital property. A valuation can help determine what the business may be worth and give both sides a clearer financial picture.
The court may also consider when to value the business. Changes in the company’s value during the divorce can affect the property division analysis. Business owners should keep financial records up to date throughout the case.
3. Consider how property division could affect the business
Dividing marital property does not always require selling a business. The parties may use other assets to balance the value of a business interest. The final arrangement can depend on the facts of the case and the assets available for division.
Business owners should also consider how a proposed agreement could affect daily operations, ownership and future income. A property settlement that looks reasonable on paper may create problems if it does not account for how the business actually operates.
Keep the business in focus
A divorce can force a business owner to look at the company in a different way. What once felt like a separate part of life may become part of a much larger financial discussion. Its records, value and role in the household can all matter when the parties divide property.
Understanding those issues can help a business owner approach the process with a better picture of what is at stake. A Michigan family law attorney can review the business, other marital property and the circumstances of the divorce and provide legal guidance tailored to the case.