Business Owners: How should I run my business if I am getting divorced?
Here are the top valuation issues every business owner should know before filing for divorce.
One question people will ask is
2. How should I run my business if I am getting divorced? Do I take on more debt? Can I start a new business venture?
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Typically we recommend you continue to run your business in the same manner as you did prior to the divorce and not to make any decisions that you think will make the value lower (or higher) or do things that you think are more advantageous in the divorce litigation. Here's the thing - most of the time if you decide to do something different in order to increase debt or reduce your profit which you think will help you, it could potentially backfire on you.
The historical financials, revenue, expenses, profit, losses, assets and debts, all tell the valuation expert a story. And most of the time the valuation experts will be looking at historically what has happened over the past 3 to 5 years. And this history will tell a story about how you've managed the company, how you've increased revenues or profit over time, or if there has been variability in the performance of your company. It will tell the whole story, either steadily up or up and down over time. But it could also potentially tell an expert how you have changed things more recently in a way to contrive the value after you have filed for divorce.
You have to understand that judges and lawyers...and even valuation experts typically work on many cases every year and always are concerned if they start to see a very successful company all of a sudden barely breaking even – or losing money - right before a divorce. Even when things really do go downhill, for legitimate reasons, everyone is skeptical. Most couples lose a bit of focus, when going through a divorce, because it is emotionally draining – so you will see the business results falter sometimes as well. But if you do anything to really force the company to look worse, many the things that you're trying to do are going to be very apparent to the other side and maybe not look as good in the judge’s eyes. So, it is best to document most of your decisions in a way that supports that you are doing the best you can to continue to keep the business successful and profitable.
So, I am considering filing for divorce, but want to be prepared - What should I do next?
Give us a call! No really, you should reach out to someone who specializes in valuations for the purpose of divorce. There may be many valuation companies near you, but do they understand the divorce court system in your state? That would be a good first question to ask. Then see how many times they have testified. Are they trained as a mediator? Do they understand how to negotiate settlements with other experts?
My name is Melissa Gragg and I am a divorce valuation expert witness in St. Louis, Missouri. I work with business owners and entrepreneurs in every stage of the divorce process, whether in mediation, collaborative divorce or litigation. There are many questions and myths about what happens in a divorce when you own a business. If you have any additional questions or would like to talk about your specific situation, please give us a call or text us at (314) 541-8163 or check out our website at https://www.ValuationStLouis.com/
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