Options for Business Owners Going Through a Divorce in Arizona

Wed 6th Dec, 2017 Arizona Community Property Laws

Some people going through a divorce in Arizona ask what is the process of dividing a business in an Arizona divorce.

At the point when a couple goes through separation, resources and liabilities are also divided equally through a procedure called Equitable Distribution.

Basically, a court will order property as either community or separate, put a price on the property, and afterward allot the property among the spouses.

However, some kinds of property are less challenging to distribute than others. For example, if the couple has a vehicle, both of them will likely keep their separate vehicles. Similarly, other types of property are harder to evaluate equally, such as the marital residence.

To divide the home, the parties may consent to sell the house and split the equity. In any case, if one party is willing to stay in the house, then they will need to purchase the other spouse out.

Different sorts of property can be significantly harder to divide. A good example is when there is a business. These few techniques are the most basic courses for spouses to divide a business in a divorce. There are upsides and downsides to every technique that the parties ought to consider before choosing a strategy for circulation.

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Purchase Out

The most widely recognized technique utilized is where one spouse purchases the other spouse’s community property interest in the business. It works if the purchasing partner has enough money to buy out the other spouse.

Generally, in this circumstance, the purchasing spouse will simply pay the other spouse a lump sum amount. In other cases, couples may consent to a payment plan over time.

Remember that the purchasing spouse doesn’t really need to have enough money in order to transfer the buyout if there are other fluid resources. The purchasing spouse could likewise think about offering another asset if he or she didn’t have enough money to give the other spouse.

Co-Ownership

Dividing a Business in an Arizona Divorce.

Another approach to convey a business resource is to keep possessing the business jointly even after the separation. If both partners need to continue running the business, they could continue to co-own and run it despite the fact that they are divorced. Another variant of co-ownership may exist where one spouse keeps on maintaining the business while the other spouse agrees to receive installment payments from future profits to pay for his or her interest in the business.

Sell the Business

In some cases, it may make more sense to sell the business and divide the proceeds. If the business is not particularly profitable, it might take a lot of time to find a buyer. Likewise, it may not be the best choice if the spouses differ over the estimation of the value of the business.

We would like to thank John Menzel, J.D. for contributing this article. Mr. Menzel and his firm defend people charged with drunk driving and related offenses in New Jersey.

FAQ: Business Owners Going Through Divorce in Arizona

Can a business be divided during a divorce in Arizona?

Yes. A business can be divided during an Arizona divorce if it is considered community property. Even if one spouse started the business before marriage, the increase in its value or profits during the marriage may be subject to division depending on the facts of the case.

Is a business started before marriage protected in an Arizona divorce?

Not necessarily. A business established before marriage may remain separate property, but the community may still have a claim to part of the business’s increased value if community labor, funds, or efforts contributed to its growth during the marriage. Arizona courts often evaluate whether the marital community deserves compensation for that increase.

How is a business valued during an Arizona divorce?

Business valuation typically involves reviewing financial statements, tax returns, assets, liabilities, goodwill, market conditions, and earning potential. Depending on the type of business, a professional business appraiser may use the income, market, or asset approach to determine its value.

What happens if both spouses own the business?

If both spouses own the business, several outcomes are possible. One spouse may buy out the other’s ownership interest, the business may be sold and the proceeds divided, or the spouses may continue operating the business together after the divorce if they agree. The best option depends on the business structure, finances, and the parties’ ability to work together.

Can I keep my business after my divorce?

Yes. Many business owners keep their businesses by compensating the other spouse with other marital assets or through a negotiated buyout. Courts generally try to divide marital property equitably without unnecessarily disrupting an operating business.

Does my spouse automatically own half of my business?

No. Your spouse does not automatically receive half of your business. Arizona is a community property state, but ownership depends on factors such as when the business was started, whether community funds or labor contributed to its growth, and the business’s overall value. Every case is unique.

How can business owners protect their company during a divorce?

Business owners can often reduce risk by maintaining accurate financial records, avoiding commingling personal and business funds, obtaining professional business valuations, complying with financial disclosure requirements, and working with experienced divorce counsel familiar with complex business assets. Early planning can help preserve business operations throughout the divorce process.

Will my business have to be sold during an Arizona divorce?

Usually not. Most divorcing business owners are able to keep operating their businesses.

Does a business need to be professionally appraised in a divorce?

In many contested divorces, yes. A professional business appraisal can provide an objective opinion of value and may reduce disputes between spouses. Accurate valuation is especially important when the business represents one of the couple’s largest marital assets.

What is business goodwill in an Arizona divorce?

Business goodwill refers to the value of a business beyond its tangible assets, such as its reputation, customer relationships, and earning capacity. Arizona courts may consider whether goodwill exists and whether it should be included when valuing certain businesses or professional practices during divorce proceedings.

Can a divorce affect day-to-day business operations?

Yes. Divorce can impact decision-making, cash flow, ownership interests, and management responsibilities. Business owners often benefit from developing a strategy to maintain normal operations while addressing financial disclosures, valuations, and negotiations during the divorce.

Should business owners hire a divorce attorney with business valuation experience?

Yes. Business ownership adds legal and financial complexity to a divorce. An attorney experienced in business valuation, community property issues, and high-asset divorce cases can help protect both the business and the owner’s financial interests while working toward an equitable resolution.

Arizona Divorce Attorneys Representing Business Owners Facing Divorce

If you have questions about dividing a business in an Arizona divorce case, you should seriously consider contacting the attorneys at Hildebrand Law, PC. Our Arizona community property and family law attorneys have decades of combined experience successfully representing clients in community property and family law cases.

Our family law firm has earned numerous awards such as US News and World Reports Best Arizona Family Law Firm, US News and World Report Best Divorce Attorneys, “Best of the Valley” by Arizona Foothills readers, and “Best Arizona Divorce Law Firms” by North Scottsdale Magazine.

Call us today at (480)305-8300 or reach out to us through our appointment scheduling form to schedule your personalized consultation and turn your Arizona community property or family law case around today.

Hildebrand Law, PC Voted Best Divorce Law Firm in Arizona in Arizona Foothills Magazine

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