If you spent years building a successful company, divorce may raise difficult questions about its future. You may wonder whether your spouse could claim part of the company or whether the divorce could put pressure on you to sell.
In New Hampshire, divorce does not automatically require either result. However, a closely held business may become one of the most valuable assets in the marital estate. The court may need to address questions about ownership, value and future control as part of the property division process.
How divorce courts view a closely held business
A business can represent years of work, income and investment. During a divorce, the court may examine whether some or all of the business’s value belongs in the marital estate.
Ownership alone does not decide that issue. For example, a spouse may have started the business before the marriage, but the company may have increased in value during the marriage. In other situations, a spouse who did not own part of the business may have contributed labor, management support or financial resources to help it grow.
Factors that can affect what happens to the business
Dividing a business is rarely as simple as assigning a dollar value to it. The court may need to consider financial, operational and ownership issues that do not exist with many other assets. What happens to your business may depend on factors such as:
- The business’s value compared to other marital assets
- Existing business debts and financial obligations
- Partnership, shareholder or operating agreements
- Each spouse’s involvement in the company
- Whether one spouse can buy out the other’s interest
These facts can affect whether one spouse keeps the business, whether a buyout is possible or whether the parties need another way to divide marital property fairly.
How is a business valued during divorce?
Business valuation can become a major point of disagreement in a high-asset divorce. You and your spouse may disagree about what the company is worth and what factors should influence that number.
Disputes may involve business goodwill, future income, ownership interests or financial records. The final valuation can affect how much of the marital estate is connected to the business and what assets each spouse receives.
Can a spouse force the sale of the business?
Courts generally prefer outcomes that allow a successful business to continue operating. A sale is not the automatic result simply because your business is part of the marital estate. In many cases, the parties address the business’s value through a buyout or by dividing other assets. Certain circumstances can make a sale more likely:
- The business representing most of the marital wealth
- Limited assets available to offset the business’s value
- Business debts that complicate asset division
- Joint ownership and operation of the company
- Disagreement about how to divide the asset
When these issues arise, a sale may become one way to convert the business into an asset that can be divided between you and your spouse.
What business owners should know
A divorce does not automatically force the sale of a business. In many cases, the bigger issue is determining what the business is worth and how that value will factor into the division of marital property.
Even so, a closely held business can create challenges that do not arise with many other assets. Questions about ownership, valuation and future operations can all affect the outcome of the divorce.
