Whether it is prior to a wedding or during the marriage, it is not uncommon for people to start a business and run it diligently for years. When divorce becomes a reality, however, the couple must work through the legal process to determine not only the value of the business but arrive at a compromise regarding the division.
In recent decades, many couples have chosen to develop and run an online business rather than a brick-and-mortar storefront. This can lead to an additional layer of complexity during the property division process.
What is the valuation process?
The couple generally must decide between three paths when determining the distribution of the business after divorce. They could sell the business and split the profits, one spouse could buy out the other, or they could continue to run the business together post-divorce. To facilitate the decision, the couple must arrive at an accurate valuation of the business before the taking the next step.
A business valuation can follow many methods. The value could be based on the current comparative sales price, the future value based on a history of profits, the current value based on assets and intellectual property, or any number of methods. Part of the problem with an online business, is the valuation cannot depend on physical assets such as a storefront, warehouse, commercial property or company vehicles that a brick-and-mortar organization might rely upon. This can add some challenges to the valuation of a strictly digital business.
Whether the business has a physical presence or exists only online, it is likely that the couple have poured significant resources into developing the brand identity, cultivating a customer base and crafting vendor relationships. The divorcing couple must carefully navigate the legal process when dividing the online business to reach a successful compromise.
