Dividing a Business during an Arizona Divorce
If you are a business owner, you probably worry about complications during a divorce. While most Arizona judges do favor clean and uncomplicated property divisions, there could be some situations that will make things a bit more difficult. Find out about dividing a business during an Arizona divorce.
Ways in Which Divorce can Affect Your Business
A divorce can affect your business in several ways if both you and your spouse are owners/partners.
Whenever two spouses have ownership of a business and they decide to get divorced, some kind of division will occur. In one of the scenarios, both of the partners will retain their ownership. They will continue being business partners and representing their own interest in the corporation after the divorce.
Alternatively, it is possible for one of the spouses to buy the other one out. An offset option is also plausible. In that case, one of the spouses will give their shares to the other and they will be compensated with another community asset of similar value.
When both spouses own a part of the business, a 50-50 division will seem most likely. This isn’t always the case, however. Some of the factors that will be examined in court to make the decision will include contributions to the development of the company made by each individual prior to the marriage, ownership of business assets before the marriage and the interests of other business partners.
Business Division in an Arizona Divorce
For a start, court will have to decide whether the business is community property (acquired during the marriage) or if it belongs to just one of the spouses and is separate property. Usually, a person gets to keep their separate property after a divorce while community property is split between the two spouses.
To make the division, a court will examine financial records, statements about profits and losses, contracts, balance sheets, invoices and other relevant financial information. Even internal minutes and certificates could play a role in an adequate and fair division.
It’s also very important to keep in mind that different types of businesses hold different kinds of assets. A manufacturing business will usually consist of the property and the equipment being used. Service-based businesses get added value from contracts, long-term customers and know-how. In such a situation, the division of assets will be a more challenging task because it will go beyond the obvious.
A business that is community property may not survive a divorce. In such situations, breaking up the business would be the smart thing to do. This process is the most complex one because a fair share will have to be determined for each party. Experts and professional valuators will typically be involved to calculate assets and the value of the business after it gets broken down.
Very often, the break-up value of the business is lower than the value of assets because of debt and financial complications. Thus, you may think that you’re entitled to a certain amount but it could be smaller.
Finally, when a business breaking up occurs, a certain order of priority will apply to the payments being provided to affected parties. If there is any debt, the creditors will be the ones to receive outstanding balance payments first. Investors get their share next and the partners will split the remaining amount among themselves.
To simplify things, you should definitely consider talking to your spouse about the business. Getting the company handed to one of the partners and compensating the other one justly makes things easier. If the divorce is a complicated one and there’s no room for communication, however, you should be prepared for additional expenses and a somewhat lengthy procedure as far as dividing a business during an Arizona divorce is concerned.