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How Your Divorce May Affect Your BusinessGoing through a divorce can be perilous for your business, particularly if it is a smaller, family-run business. Some owners have seen the value of their business drop or lost control of it because of the consequences of the divorce process. It is important to work with your divorce attorney on protecting your business during the divorce and allowing it to thrive afterward.

Marital Property

You may need to fight for ownership of your business during your divorce negotiations. Your business is marital property if you created it during your marriage or used marital assets to invest in it. A business that predates your marriage can be nonmarital property, though the amount that the business increased in value during your marriage can be a marital asset. You have several options when your business is part of the equitable division of property. You can:

  • Have complete ownership of the business in exchange for other marital assets of equitable value;
  • Co-own the business with your former spouse after the divorce;
  • Split your business into two companies that you own separately; or
  • Sell your business and divide the proceeds.

The option you choose may depend on the size of your business and how involved your spouse is in it. Your spouse may be content to let you keep the business if he or she is not part of it. A spouse who helped create and run the business may be unwilling to give up his or her business ownership without ample compensation. However, co-owning or dividing a small business may be impractical, and selling your business means losing your source of income.

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Calculating Goodwill as Part of Business ValuationA business’ value extends beyond the earnings that can be attributed to its tangible assets. Factors such as reputation amongst customers can increase its value in ways that are harder to calculate. These intangible assets are known as goodwill and are commonly included in business valuations. When a divorcing couple is assessing a business during the division of property, goodwill should be part of the valuation. However, it can be tricky to put a monetary value on goodwill, and not all forms of goodwill are treated equally in a divorce. An experienced business assessor is needed to understand the true value of goodwill.

What Creates Goodwill?

When competing businesses offer similar products or services, it is a business’ goodwill that may make a difference in a customer’s choice. Goodwill can create greater economic returns by attracting new customers and bringing old customers back. Several factors can add to a business’ goodwill, including:

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