In Tennessee, divorce courts divide shared property equitably based on various factors. Without a prenuptial agreement or if your business isn’t a separate inherited asset, the court may require you to buy out your ex-spouse’s share or offer other assets in exchange. In some cases, they might even order the sale of your business to split the proceeds.
When you start the divorce process, understand that courts typically expect and often require financial disclosure – it also serves as a powerful tool to protect your business interests. By providing a clear picture of your business finances, you can demonstrate your company’s true value, highlight its complexities and establish your key role in its operations.
Gather essential business documents
You need to keep detailed records of all financial transactions. Make sure to collect:
- Tax returns for the past 3-5 years
- Monthly and annual profit and loss statements
- Current balance sheets
- Cash flow statements and forecasts
- Inventory of business assets and liabilities
- Records of business loans and debts
- Payroll records
It is also important to maintain a clear distinction between business and personal finances. If your spouse took part in the business, make sure to also document their specific roles and contributions. More importantly, remember to seek legal advice before making major changes to your business structure or operations. This can help prevent possible claims of financial misconduct.
Get an accurate business valuation
Having forensic accountants or business appraisers assess your business’s worth is crucial. It provides an objective and credible valuation that can withstand legal scrutiny and possibly prevent disputes over the business’s value. Qualified appraisers use several methods to provide the most accurate evaluation for your business type and situation, including:
- Calculating the net worth of all assets minus debts
- Comparing your business to similar businesses recently sold
- Calculating value based on the business’s ability to generate future income
If your business has multiple owners, review any existing buy-sell agreements. These contracts outline how owners can transfer their share if they leave the business. They may provide guidelines for valuing your share or procedures for buying out a divorcing owner’s interest.
Protect what you’ve built
Divorce can be overwhelming – emotionally, psychologically and financially. However, don’t leave your business’s future to chance. Consider reaching out to an attorney who can help you find the best way to protect your interests.