Mitigating the Risks of Business Depreciation During High-Asset Divorces

Divorce is challenging in any situation, but when you and your spouse own a business, the situation is even more complicated. Your divorce threatens the stability and financial well-being of your business, and it’s crucial to plan for that as you navigate this difficult time. With careful planning and assistance from professionals, you can help your business weather this storm.

Unsure of your next step in your divorce? It’s time to talk to the team at Kirk Drennan Law. Call us at 205-953-1424 to schedule a consultation now.

Business Valuation and Appraisal

Early in the process, you’ll need to secure a fair and unbiased valuation of your business. This will make it easier to divide it fairly, but equally as important, it will allow you to track any depreciation or loss of business that comes with your divorce. In addition to hiring an appraiser to determine the market value of the business, you may want to hire a financial consultant who can do a full analysis of your company’s finances. You’ll want to ensure that your spouse hasn’t taken out undisclosed lines of credit or otherwise manipulated the company’s finances.

Maximizing Liquidity During Divorce

Divorce can be an expensive process, especially as you transition from one to two households. This is a time to maintain sufficient liquidity in your business to avoid issues. It’s likely you’ll be unable to obtain additional lines of credit or refinance the company’s assets until the question of ownership is decided. For that reason, it’s crucial to ensure that your business can ride out this storm so you can get it re-established and on a path of growth after the divorce is complete.

Full Documentation of Any Relevant Losses or Changes

Why is a business at risk of depreciation during and after a divorce? To put it simply, businesses thrive on stability and careful, calculated changes. Divorce provides neither. If you and your spouse have always been the face and leadership of a business, a divorce leaves the future of the company up in the air. That can lead to uncertainty among staff members, particularly if they are loyal to one spouse and not the other.

It can also cause cash flow issues; imagine, for example, high-spending clients who are loyal to one spouse and will take their money with them to another company if the other spouse takes over the company. It’s likely that you and your spouse each bring different skills to the table, and divorce means losing one set of skills. This can make investors, clients, vendors, and employees nervous and lead them to start looking elsewhere.

If changes occur, document them. You’ll likely need to discuss them with your high-asset divorce attorney and business appraiser to see how they affect your company’s value.

Managing Communication with Staff and Vendors

How can you stop clients, vendors, and employees from jumping ship as soon as they hear about the divorce? You have to get ahead of the news and decide how much you want to share and how you want to share it. Ideally, you and your spouse will be on the same page regarding the business. Even if you two are facing an adversarial divorce, it’s in no one’s best interest for the business to collapse.

Talk about presenting a united front. You may find it helpful to announce the divorce in a public forum and briefly discuss your plans for the business. Even just hearing that there are no plans to close the business or change operations can provide reassurance to employees and clients.

During this time, maintain strong communication with clients, vendors, investors, and others. You have a lot on your personal to-do list, but it is essential to keep business operations running smoothly.

Preparing for a Handover

In most divorces, one party buys out the other. While it’s difficult to plan a successful transition and handover during a divorce, doing so can help the business continue operating. It’s highly recommended that you bring in a specialist to help with this transition—otherwise, common missteps can lead to expensive losses.

Choose Kirk Drennan Law for Your High-Asset Divorce

High-asset divorces pose unique challenges and demands. With the team at Kirk Drennan Law, you can navigate this time with as little stress as possible. Schedule your consultation now by calling us at 205-803-3500 or getting in touch online.