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Divorce impacts business owners in many ways

On Behalf of | Jun 5, 2019 | Family Law |

When a divorce takes place in Alabama or any other state, it could mean significant changes for an individual. For a business owner, it is important to understand how much the company is worth and how having a business could impact the final divorce settlement. Ideally, the company’s value will be assessed by an independent professional appraiser. This person should have access to any documents needed to come to a fair valuation.

It is important to note that a business owner may label any income generated by the company in two different ways. First, he or she may earn a salary comparable to anyone else who fulfilled a similar role with an organization. In addition, an owner may take a 20% return on capital if the business is qualified to do so. This may reduce an owner’s income and increase the value of the company.

The more valuable the company is deemed to be, the more a spouse may be entitled to in the final divorce settlement. However, by reducing his or her income, an individual may be required to pay less in spousal and child support. In some cases, spousal support payments may be structured in a way that provides a spouse with a portion of what the company is worth without risking tax benefit recapture.

When a couple opts for divorce, all marital assets may be subject to division in a final settlement. Therefore, individuals may benefit from having accurate valuations of all marital property. This may allow a person to negotiate a fair settlement that allows them to retain their lifestyle after the divorce becomes official. An attorney may be able to help clients going through a divorce negotiate a settlement that is in their best interest.