Strategic planning can provide married business owners with a foundation for any transition such as a divorce. While Virginia courts oversee the equitable distribution of marital assets and debts, spouses can propose the valuation for that process. How can a business structure account for the possibility of a divorce?
Defining the valuation formula
When spouses build a company together, they can draft a formula into the operating agreement. This document acts as a binding contract that dictates how to calculate the company’s worth during a transition. Doing this step can ensure both partners understand the financial stakes from day one.
Choosing the valuation standard
Spouses can also select a valuation standard in a premarital or marital agreement. While Virginia courts often default to “intrinsic value,” partners can agree in writing to use “fair market value” or “net book value.”
Using an annual stated value
In addition, married business partners can meet every year to sign a formal certificate that declares the current value of the entity. This practice creates a paper trail that shows what the couple agreed upon during stable times.
Selecting a neutral finance professional
Further, naming a forensic accountant in the initial formation papers can remove the stress of choosing an appraiser during a conflict. This third-party professional provides an unbiased perspective that can carry significant weight in legal proceedings.
Defining the financial rules of a married partnership
A family business represents a lifetime of ambition and sacrifice for a married couple. However, navigating business planning can be complex when considering personal transitions that could risk their professional legacy and financial security. By seeking legal advice, they may better protect their interests and rights while defining the financial rules of their partnership.