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Will Divorce Be the Death Knell of Your Family Business?
Divorce does not have to be the end of your family business if you take a few precautions and get the proper legal help.
January 22, 2012 /Dating - Singles PR News/ -- Collectively, family businesses are the engine that drives the U.S. economy, not to mention a repository of passion, historical significance and familial pride. In fact, according to figures from the Small Business Administration, 90 percent of businesses in the United States are family owned.
The close-knit structure that accompanies most family businesses has many advantages -- convenience, flexibility, employment cost savings and getting to work with the people you love, to name a few. Yet, when mounting family tensions culminate in divorce, this strength can quickly turn into a crippling business weakness.
Divorce can tear a family business apart. However, with the proper planning, a measured response to divorce proceedings and assistance from a Hennepin County Family Law firm, you can takes measures to prevent your Minnesota family business from faltering in the wake of a marital split.
An Overview of How Family Businesses Are Treated Under Minnesota Divorce Law
In Minnesota, family businesses, like any other type of property, may be considered assets subject to equitable division upon divorce. Absent consideration of some prior arrangement between the splitting couple, equitable division means that property will be divided based solely on what a court deems to be fair, taking into account factors including the length of the marriage, the age, health, and income potential of each party, and the contribution of each spouse to the marital property (including contributions made as a stay-at-home partner). But an equitable division does not necessarily mean a 50-50 split.
Unlike other types of property, however, family businesses raise a unique and complex set of questions in divorce. Is the business subject to other claims not related to the property division in the marriage? What are the business's debts, and how will the ultimate disposition of the family business impact the tax considerations of each party? And, what will be the process for Minnesota family business valuation? Even with an objective appraiser, setting the value of a business is more an art than a science; among other things, the valuation can be based on the nature and history of the business, the current economy, financial records, putting a price on intangibles like goodwill and customer relations, and, of course, the value of stock sales (if any have taken place). Considering all the variables and what a huge impact the "on paper" value of a business has on how much property each party is entitled to in divorce, it is critical to retain a credible valuation expert and a strong advocate to argue for a fair business valuation.
Planning For Every Eventuality Is Essential
Many couples do not want to consider the possibility of divorce at the time they marry. While this sentiment is certainly understandable, it is not always prudent, especially when a family business is involved: preparing a prenuptial agreement can establish a plan for keeping a business intact in the event of a divorce.
Even if couples do not execute a prenuptial agreement in advance of their wedding day, a postmarital agreement regarding division of property and assets may be an option later in the marriage. Postmarital agreements can be especially important if a family business grows and changes during the course of a marriage (under Minnesota law, prenuptial agreements must be fair both at the time they are signed and at the time of divorce, so even a valid prenuptial agree can become obsolete if by the time of a couple's divorce their circumstances have changed substantially).
Get Help Navigating Minnesota Divorce Law
As important as planning for the possibility of divorce is, even without a prenuptial agreement there are other measures that can be taken to keep a family business from breaking up along with a marriage.
The viability of the family business should be prioritized, and business concerns should be addressed objectively, regardless of the emotions both parties in a divorce are likely to be feeling. An independent business appraiser can help you and your former spouse agree on the value of your family business. And, stick to legal strategies to reach a solution -- intentionally decreasing revenue and similar ploys to secure a more favorable divorce settlement can have serious consequences and may even put your business in jeopardy.
If you are concerned about how a divorce could affect your family business, get in touch with a divorce lawyer experienced in asset protection today.
Article provided by Kathleen M. Newman & Associates, P.A.
Visit us at www.kathynewmanlaw.com
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