Divorce is a painful and tiresome ordeal, and the process can become even more complex when business ownership comes into the picture. In New Hampshire, business owners going through a divorce can face significant challenges, including the division of assets, child custody, and other legal and financial concerns. The effect of divorce on business ownership in New Hampshire is not something that can be ignored. This article examines the various ways in which divorce affects a business in New Hampshire.
Division of assets
For business owners in New Hampshire who are getting a divorce, dividing assets can be a thorny issue. New Hampshire is an equitable distribution state, which means that in a divorce, assets are divided in a manner that the court considers fair. This does not necessarily mean an equal distribution of assets. Both spouses are entitled to an equitable share of all assets, including a business.
If the business was started during the marriage, then it is likely to be classified as a marital asset. In such a scenario, the business will be subject to division between the two divorcing spouses. However, if the business was established before the marriage, it may not be considered a marital asset, and therefore not subject to division in a divorce.
One solution to dividing a business is for one spouse to buy out the other’s interest in the company. This can be done through negotiations, where the spouse retaining the business compensates the other by giving up their interest in other assets such as real estate, bank accounts, or investments.
Valuation
Valuation is another critical factor in determining the division of assets in a divorce. With businesses, it can be challenging to determine the value of the company. Valuation experts are often employed to evaluate businesses to help assign a value. There are various methods used to value a business, including the net asset value method, the income approach, and the market approach.
During a divorce, disagreements regarding business valuation can arise, which can prolong the process and incur significant costs. It is worth noting that the valuation of a business can also have tax implications, and therefore divorcing spouses should seek legal and financial advice when making such decisions.
Child support and alimony
Child support and alimony are other factors that can affect business ownership in a divorce. Child support payments are primarily based on each parent’s income. If the business owner’s income is high, then child support payments may be substantially higher. Child support payments impact business ownership as it may affect the amount of money the business owner can reinvest in their company.
Alimony or spousal support payments are also determined based on the income of the spouse who pays. If a business owner is responsible for paying alimony payments, it can impact the business’s cash flow. The payments may reduce the business’s ability to reinvest profits back into the business or limit an owner’s ability to take on additional debt to grow the business.
Business structure
Another significant consideration when it comes to divorce and business ownership in New Hampshire is the structure of the business. Business structures such as LLCs, partnerships, and corporations may have different implications in a divorce. LLCs, for example, can protect business ownership by separating personal and business assets.
Partnerships have a higher risk of dissolution if one partner divorces, whereas corporations have a separate legal entity, and business ownership does not necessarily impact shareholder status.
Summary
Divorce is never a smooth or pleasant process, and it can become even more complicated when business ownership is involved. Business owners in New Hampshire who are going through a divorce need to have strong legal representation and a sound financial plan. Divorces can have a significant impact on business ownership and the ability of the company to continue operating. Understanding the legal and financial implications of divorce can help mitigate the negative impact of the divorce on the business.