While some of the major employers in Akron include Summa Health, the Cleveland Clinic, and others in the health care industry and government, these large organizations only make up one part of the Akron economy.
There are also thousands of small businesses in Akron. Small business owners are particularly vulnerable to changes in their personal life. For example, a divorce can lead to a complete split of a small business, leaving employees and owners spinning.
How Are Businesses Valued in a Divorce?
When you seek a divorce in Akron, the Summit County Domestic Relations Court will require that you complete an Affidavit of Property, which can be found on the court’s Forms Page. This form requires you to list the “fair market value” of all your assets, which will include your business.
You will likely be required to get a third-party appraisal agency to review your business records and estimate the FMV of the business. Then, the court will review other aspects of how it has been operated and how much of the value was acquired during the marriage to determine the value that belongs to each spouse.
Do I Have to Sell If I’m Getting a Divorce?
If you do not want to sell your business, you will not likely have to. Ohio courts rarely make decisions that will result in so much strain on the business that it fails. There are many options other than selling a small business if you are getting a divorce. Although part of the value of the company may belong to your spouse, you have the option of buying them out or continuing to work with them.
The only reason a court would order you to sell your business is if both parties refused to continue working with one another and you couldn’t come to an agreement about how to split the value and operation of the business. Even then, the court might find it “fair and equitable” for you to get all the business ownership while your spouse gets other assets, such as a boat or house.
However, if you and your spouse decide that selling the business and dividing the proceeds is a reasonable method of starting fresh and going your separate ways, you also have that option. The net proceeds are likely to be divided according to how much everyone contributed to generating the revenue of the business. This may require some negotiation, which is where your Akron divorce lawyer can help. It’s best to reach a mutually agreeable arrangement instead of waiting for the court to handle everything.
When an Ex-Spouse Gets Part of a Business
When you’re getting a divorce, and you own a business, you might wonder if your spouse will get half even if they’ve never been involved in the operation. You also may wonder if you’ll have to continue working with your spouse if they were involved. The answer to these questions varies according to your specific situation.
Will My Spouse Get Half?
In Ohio, the law requires a fair split of all property acquired during the marriage. That includes any business, even if one spouse did not contribute meaningfully to the business.
For a business that started before the marriage, any property or related assets acquired after the marriage may still have to be split. Additionally, if a spouse contributed substantially to a spouse’s business and improved its value, they may have a right to ownership or its fair value.
However, a “fair and equitable” split does not necessarily mean “half.” If you don’t want to give up ownership or value of your business to your soon-to-be ex, you may have options.
You may be able to give them other assets instead or pay them part of your business’s fair value. It’s important to discuss these options with your attorney to develop a situation that works for you.
There are two methods of dividing ownership in a business that courts often use. The court may divide ownership by splitting stock or membership interest between the parties. This does not require an expensive business valuation by a third party. The court may also assign a fair market value and order one spouse to pay the other, either in a lump sum or over time.
Assigning an FMV and allowing a payout can be complex. FMV may be based on earnings, market value, or through a combination of methods. A third-party expert will usually make the determination of how to fairly value the business.
In some cases, both parties may hire an expert to determine the value of the business, and there will be a battle between which expert is correct. The court may make the ultimate decision.
Will I Have to Keep Working With My Ex?
If your business could not have succeeded without your spouse’s skills or your spouse was an employee, you may have to develop a plan to operate the business together after divorce.
You may also have the option to buy out the portion of the business that your spouse is entitled to. To do this, you will have to get the business appraised and negotiate a reasonable offer.
Get Help To Divide a Business
Your lawyer can help connect you with experts and business professionals to determine how much your business is worth and how to proceed if you want to buy out your spouse’s portion. Your attorney can also assist you with developing an agreement for how you can continue working with your spouse if you think that is an option.
If you own a small business in Akron and are considering a divorce, you should immediately contact a divorce lawyer who can help get the best outcome possible. You have many options regarding how the business continues. At Erb Legal, we can help you understand your rights and ensure that you are not taken advantage of.
Call Erb Legal today at 330-249-1778 or use our contact form to reach out.