Dividing marital assets in a Wisconsin divorce is often complex. When a business is involved, the process can become even more complicated.
Wisconsin law requires that all marital property be divided equitably, or fairly. The law starts with the presumption that an equal division is fair but can alter an equal division based on various factors.
A business is typically a piece of marital property subject to division along with all other marital property.
There are typically three questions that must be answered: who is going to keep the business, the value of the business and how this impacts property division.
Who keeps the business?
The first question can sometimes be easily answered if only one spouse owns the business. Absent extraordinary circumstances, that spouse will likely retain the business.
The situation is trickier when the business is co-owned by both spouses. If you and your spouse co-own a business, the law does not require one of you to give up your portion of the business. You can continue to co-own and operate the business as ex-spouses if you wish.
Although this is an option, it is not typically recommended. Running a business together means you will continue to be closely involved in each other’s lives and your finances will continue to be mixed. Unless you are sure you can separate your personal and professional life from your ex-spouse’s, continuing to run the business together is not a good idea.
When the court must decide
If you co-own the business and neither of you want to give it up, but do not want to continue working together, a court must decide who gets the business. This decision is based on various factors.
Some factors the court considers include the percentage of the business owned by each spouse, the value each spouse brings to the business, how involved each spouse was in business operations and the division of other marital assets and liabilities.
A court may also examine one spouse’s ability to buy out the other spouse. If you are determined to keep the business, you should show you can afford to buy out your spouse’s share.
Determining the value of the business
Once you determine who keeps the business, you must obtain a business valuation. You and your spouse can choose to use the same appraiser and agree to use the number the appraiser comes back with or you can choose to each use your own appraiser.
When you have two appraisals from two different appraisers and cannot agree on which one to use, your best option might be to select a valuation number in between each appraisal. This is usually fair to both parties.
If you cannot agree on a valuation number, the court must decide. Courts are not valuation experts. Therefore, a court is likely to choose a valuation number somewhere in the middle.
Consider a buyout agreement
When the valuation number is chosen, a buyout agreement is a solution to consider. This involves the spouse who keeps the business buying out the other spouse’s share of the business.
This allows the spouse keeping the business to retain control of the business and while providing the spouse giving up the business a sum of money for selling their share. This can be a positive solution that benefits both spouses.
