If you are facing a Georgia divorce and you own a business with your spouse (or if your spouse owns a business), be prepared for some complicated, unique issues. The attorneys at Bivek Brubaker & Prescott have handled many complex divorces involving closely-held family businesses where both spouses worked in the company or were involved in the venture in some way. We also help our clients understand if they are entitled to anything from their spouse’s business if they divorce. Here’s what you need to know about divorce and business ownership.
Georgia law is clear in that all assets – except inheritances – acquired during a marriage may be equitably divided. This applies to any business that was started during the marriage. This means it is fair game to look into the company and its holdings to decide how to fairly structure a divorce settlement.
Oftentimes, Georgia courts will award business ownership and control to one spouse and decide a fair value or payment for the other spouse.
When companies are jointly owned and operated, the situation is more complex. For example, both spouses may be allowed to continue having ownership interests and involvement in the business after the divorce. This can lead to its own set of issues. Deals can also be negotiated where one spouse keeps a share of the company or certain decision-making rights related to the business after the divorce. These deals should be carefully worded to maximize the health of the business while minimizing conflict between the spouses. Oftentimes, businesses can carry debt and detailed indemnification language is needed to protect one spouse from the business debts and/or loans.
There are various methods that may be used to value companies, and the type of business usually plays a big part in which method is used. For example, the method used to value a professional services business where one of the spouses is a doctor, attorney, or financial advisor is different than the method that would be used for a retail store. When valuing a company, various metrics and methods are used, including evaluating comparable businesses, revenues, hard assets, and real estate holdings.
A thorough discovery process should take place in any divorce involving a business. Analyzing revenues, bank statements, corporate tax returns, profit and loss statements, and other business records are critical in understanding the health of a company, its value, and how best to divide it (or decide a fair buyout for one of the spouses). Discovery can also help uncover if one spouse has tried to get rid of their ownership interests (for example: selling to a friend or a third party) to shield the company from the other spouse. A full audit of a business is sometimes necessary when one spouse has recklessly or negligently spent business funds for personal use or gain.
Business valuation experts are often used to decide if a company has value, how much, and what you might be entitled to as a spouse. These experts can provide insight into what method might be best for putting a value on the company. For example, experts often use market-based approaches, income-based approaches, or a combination of methods.
During a divorce, you have options to ensure that your spouse isn’t squandering away assets or purposefully running the business into the ground to lessen its value during the divorce. For example, receivers can be appointed and freeze orders put in place to ensure company assets are protected and the venture continues to run smoothly. A forensic auditor can also be hired to review all business expenses and revenues to make certain business funds have not been hidden or transferred to non-business accounts for personal gain.
If you are thinking about divorce (or are in the middle of one) and there is a business at stake, we strongly encourage you to consult with knowledgeable attorneys. At Bivek Brubaker & Prescott, our experienced Marietta family law attorneys can help you learn about your rights and how businesses are divided in a Georgia divorce. Please contact us online or call 404-793-6530 to speak with us.