HOW IS A FAMILY BUSINESS DIVIDED DURING DIVORCE IN NM?
Do you own a family business and are either considering or going through a divorce in New Mexico? Dividing a family business during divorce in New Mexico can greatly extend the time and expense of your New Mexico divorce. Despite the potential complexities, at its core dividing a family business is like dividing other community assets during divorce.
HOW IS A BUSINESS’S VALUE ESTABLISHED FOR DIVORCE?
A business’s value is generally established through an 11-706 business evaluation. This process is usually completed by a CPA, or financial expert that appraises the business’s value. Redwine CPA is generally used to conduct a business valuation in New Mexico. Other options include Shane LeMon.
A business’s value is generally based on the following:
- Land & structural value of building;
- Accounts receivable;
- Machinery; and
- Goodwill/Intellectual property.
HOW IS A BUSINESS DIVIDED DURING DIVORCE IN NEW MEXICO?
Dividing a business during divorce is like dividing a home. There are three common ways to divide a business during a divorce in New Mexico:
One spouse keeps the business. With this option one spouse keeps the business and buys out the other’s spouse’s share/interest, based on the appraised value. A long-term settlement may take place when one spouse is unable to immediately cover the other spouse’s share in the business. Alternatively, one spouse may buy out the other spouse’s share in the business with an off-set of other community property, debt, spousal support, and equalization payment.
Sell the business and split the equity. This option makes sense for spouses that want to start a new chapter in their life, after the divorce is finalized. This option can create a clean break between the business and the couple. Nevertheless, the process of selling the business can greatly extend the divorce process and create the need for continued interaction between the spouses.
Keep the business and remain co-owners. Spouse’s that a deeply invested and connected to a business may choose the option of remaining co-owners. The practical difficulties of divorcing — yet remaining deeply connected through the business — often makes this option impractical at best, and impossible at worst.
DURING YOUR DIVORCE REMAIN INVOLVED AND MONITOR BUSINESS ACCOUNTS
Often one spouse is more involved with the business than the other spouse. At times, one spouse may exclusively handle the financial aspects of the community business. This lopsided financial involvement can create big problems with dividing the business’s value.
Being involved helps to ensure that the other spouse is not bleeding the company dry and can raise red flags regarding improper financial actions. A common example of improper financial action includes business money being used for items that do not benefit the community. These purchases may include:
- Paying personal expenses from business credit cards or accounts;
- Taking additional draws or payouts from the business; or
- Transferring extra money to separate accounts.
It is always essential to remain actively involved with the business and to keep your eye on account and financial information. Failing to be actively involved with the business during a divorce could lead to the business being bleeding money that is not benefiting the community.
(505) SANCHEZ HELPS YOU UNDERSTAND DIVIDING FAMILY BUSINESS DURING DIVORCE IN NEW MEXICO
Do you have questions about the legal process involved with dividing family business during divorce in New Mexico? Matthew Legan Sanchez is an top rated Albuquerque divorce attorney that can help you understand dividing family business during divorce in New Mexico. Sanchez has handled divorce cases and trials for over a decade and can help you understand the process of dividing business during a divorce in Bernalillo, Sandoval, Santa Fe, or Valencia County in New Mexico. Call (505) SANCHEZ today.
