“Preserving a Family Business When the Owners Divorce,” Valuation Podcast
Firm co-founder Robert Boyd participated in an August 3, 2021, episode of Valuation Podcast titled, “Preserving a Family Business When the Owners Divorce.”
During the program, hosted by ValuationMediation.com’s Melissa Gragg, Boyd detailed what married business owners should consider before initiating a divorce and what they should expect during the divorce process.
When a married couple who co-owns a business decides to divorce, there are three primary outcomes, according to Boyd: one party buys out the other owner, the couple sells their business, or the couple remains co-owners of the business after divorcing.
But if one party is the owner of a viable business prior to getting married, Boyd underscores that a prenuptial agreement is critical to determining how the financial interests in that pre-existing business will be divided (or not divided) should the couple later split. A prenup is key to avoiding the complex analysis of active versus passive appreciation of the business during divorce proceedings. He notes that hiring a business valuation professional will help you establish a baseline value of your business to accurately determine the assets your business will bring to the marriage.
Before initiating a divorce, Boyd outlines steps to better understand how a divorce will impact your business. Among them, he advises to “maintain the status quo” and continue to conduct business as usual to avoid adversely affecting its value; schedule an initial consultation with a divorce lawyer to walk you through what financial records you will need to gather, what information is needed from your CPA, and what his or her general approach would be to handling your case; and consult a professional appraiser to conduct a third-party evaluation of your business.
Throughout the episode, Boyd shares common mistakes couples make while trying to preserve their business in a divorce. Divorce is emotional, and dividing assets of a family-owned business makes it all the more complex and stressful. He cautions, “Don’t let the tail wag the dog by running your business into the ground.” Continue to conduct business as usual to maintain its value and be transparent in your financial dealings, he says.
“If we have to go to the courthouse, we know what to do when we get there. But my job is to keep you out of the courtroom,” Boyd says. “It’s not in people’s interest to have a judge or jury determine their financial future. Our job is to settle the case as quickly and fairly as possible.”
To watch the full episode, click here.