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How divorce can affect small business owners

On Behalf of | Jun 5, 2019 | High-Asset Divorce |

Small business owners in Arizona who get a divorce may face a number of complex financial issues. The business may be the biggest asset the couple has. In some small businesses, it can be difficult to separate business and personal expenses, but this is necessary in order to get a value for the company for the purposes of property division. It is also necessary for determining child and spousal support.

Valuating a small business can be a complicated process. The business owner might be able to claim that some of the reported income was not a salary but a return on capital. This could increase the company’s value for purposes of property division and reduce what the person may owe in child and spousal support. It may be best to work with a financial professional in determining the best approach. A professional appraiser will also be needed to valuate the company. With this value determined, the other spouse may be bought out with a lump sum payment or with the use of a promissory note.

One potential pitfall of paying a spouse for the business over time is that if the owner dies, the spouse gets nothing. Some people set up a life insurance policy or an irrevocable life insurance trust in case this happens. People should also consider tax implications of any arrangements for property division.

In a high-asset divorce, there might be a number of other assets that are complicated to divide. Since Arizona is a community property state, all assets are supposed to be divided equally, but some couples may agree to other arrangements. For example, since dividing a retirement account can be complex and expensive, they may agree that one person will keep the retirement account while the other takes another asset of similar value.