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Valuation, taxes and buyouts complicate business owner divorces

When small business owners in Maryland pursue divorces, their business assets often represent marital property. Dividing the property between two ex-spouses to settle the divorce involves identifying the current value of the business, consideration of taxes and how to structure a buyout of an ex-spouse who co-owned the business.

The task of valuing the company is usually given to an appraiser who specializes in the valuation of businesses. The appraiser will investigate business expenses and income and calculate the current market value of the business. Settlement negotiations will proceed once the final figures have been determined.

Sometimes the cash is not available for one spouse to buy out the other spouse's business share. This could be overcome with the use of a promissory note possibly backed up with a life insurance policy. The agreement might set up an irrevocable life insurance trust to fund alimony and child support. In other situations, the parties might choose to sell a business. However the settlement takes shape, the advice of a certified divorce financial planner could help a person understand the tax consequences of various approaches.

A business owner might want legal advice throughout the process. An attorney could interpret how shareholder agreements, buy/sell agreements or prenuptial agreements might influence the process. Legal information about the calculation of spousal or child support might allow a person to prepare for future financial obligations. An attorney could explain the pros and cons of different approaches to the settlement. Legal representation may also improve a person's ability to advocate for specific needs while negotiating the divorce. Knowledge of legal rights might prevent a person from agreeing to something that negatively impacts a business, undermines future income or results in high tax bills.

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