Appraising your business for Divorce in Pennsylvania Part II

Appraising your business for divorce can be a crucial step in protecting your divorce settlement from your business.

Previously, I discussed the importance of determining what part of your business needs to be evaluated for divorce, as well as finding a competent, qualified evaluator. The flip side is to protect your business from the divorce.

If two co-owners plan to stay in the business together, regardless of the change in their personal relationship, this will at the very least create a strain in the working atmosphere.

More typically, one spouse buys out the other and the exiting partner finds new employment. Then the problem is how to finance the marital settlement without breaking the business finances.

You are dealing with your life both as a grieving spouse – for divorce is a type of death – and as the manager of your business, which entails understanding concrete elements like sales, marketing, and expenses. The business also requires your attention to intangibles, like internal company morale or external goodwill the public has for your company. If you co-own a bridal shop, for instance, and customers become aware of your marital split in some obvious or negative way, that would not be good for business.

But neither would it be good for either spouse to deliberately sell off or sabotage business assets to spite the other, thinking – erroneously – that there won’t be consequences. Courts and opposing attorneys are likely savvy enough to notice deliberate or neglectful dissipation of marital assets, including the shared business.

Business owners also commonly make mistakes in the emotional stress of divorce. Some are as seemingly mild as running personal or non-business expenses through the company, or more critical choices like crucially neglecting operations, or draining profits or cash on hand. The temptation is there, and if you started as a Mom and Pop operation, it may seem that the current business still represents those early hand to mouth days.

Interestingly, these tactics may not affect the evaluation, because the law, or the courts, will set a specific valuation date, usually the date of separation, that likely precedes such activities. But they could cast you in a negative light if in the process of Discovery the opposing attorney convinces the judge of a pattern of deceit, hiding assets and intent to reduce value for one’s spouse.

Divorce and business ownership cannot be made neutral to each other, but if you and your attorney plan wisely, invest in a good, qualified evaluator and stick to the facts, it will make the inevitable wrangling over specifics go more smoothly.