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Business debts and obligations can factor into your divorce

On Behalf of | Jul 19, 2022 | Divorce

Unless you already had a successful business when you got married, you inherited it, or your interest was gifted to you, your small business is part of your marital estate. If you get divorced in Maryland you will be required to list the value of the business as marital property.

The higher the value of your business, the greater the value of the marital estate, which in turn increases your spouse’s marital share. Rather than merely looking at the revenue the company produces or the value of the assets it owns, unless you and your spouse can agree on the value, you will need a formal valuation that will take into consideration the business debts and obligations.

What your business owes reduces what it is worth

Your business’s liabilities will reduce its fair market value. Any third party thinking about buying your business would absolutely want to know about your loans and other financial obligations. They would adjust their offer based on those liabilities.

From a judgment related to a lawsuit against your company to the balance owed on financed machinery, there could be tens of thousands of dollars in debts and obligations that will reduce your business’s value.

The importance of a thorough business valuation

Rather than simply estimating, it might make sense to secure a thorough, professional business valuation that factors in financial obligations and liabilities in addition to revenue and assets. Even the depreciation of your equipment and your facilities can help reduce how much of your business’s value is vulnerable in a divorce.

Exploring the nuances of business valuation can benefit you in an upcoming Maryland divorce.