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Division of the Family Business in a Michigan Divorce

When a Michigan divorce involves a family business, the division of marital property becomes much more complicated. Businesses are considered property, and include everything from professional practices to corporations, sole proprietorships to partnerships. Whether or not both spouses have been employed by the business, the business is an asset whose value must be determined and considered when dividing property in a divorce.

Even for those couples who worked together in a family business prior to their divorce, it is rarely desirable to do so afterward. One party often “buys out” the other, giving them property of equivalent value in exchange for their share of the business. Unlike some property, though, the value of a family business can be difficult to accurately determine. The most accurate way to evaluate the value of an asset is to sell it; the value is the market price. This is often not practical or desirable with a family business, however, so other methods of valuation often must be used.

Factors & Considerations For Divorcing Small Business Owners

Factors to be considered in valuing a family business include what the business owns, such as inventory, manufacturing machinery, and other equipment. These are tangible assets. There are also intangible assets, such as patents and goodwill, or existing client relationships. What a business owes (liabilities) must also be taken into account, as debt reduces the value of the business.

Beyond assets and liabilities, there are many other considerations, such as the profitability of the business–essentially the income the business takes in, minus the expenses it incurs to operate. There are many ways to calculate these figures, so even determining profitability is rarely simple. The accounting records of the business need to be carefully reviewed by someone who understands what to look for. There are also different valuation methods which can produce vastly different figures. Similarly, the date as of which the business is valued will have an impact on what its value is determined to be.

Given all of these complexities, it’s almost never a good idea for divorcing couples to try to arrive at their own figure for the value of a family business. The expense of hiring a qualified appraiser or other expert is justified by the knowledge that nothing has been overlooked and that the value placed on the business is a fair and accurate one. This is true even when both divorcing spouses have a good level of trust in each other. In cases where one spouse suspects the other of hiding income or assets or exaggerating debts, the use of a skilled expert such as a forensic accountant is even more important.

Hire a Metro Detroit Divorce Attorney
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The best way to find an expert to value a family business for a divorce is to consult with your Metro Detroit divorce lawyer. Your family law attorney will know what type of expert is called for, which experts have experience with various types of businesses, and whose work is respected and trusted by the courts. Metro Detroit divorce attorney Carlo Martina has over 30 years of family law experience, including the successful division of numerous small businesses. To schedule a consultation, call (734) 254-1140 or complete our contact form.

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