As spouses prepare for divorce, they have to negotiate the division of their property and their financial obligations. That process can be particularly contentious when the family has enjoyed a comfortable standard of living.
Those with high-value marital estates can easily end up embroiled in conflict with their spouses about how to divide their assets. Certain types of property are more likely than others to trigger specific kinds of disputes. When one spouse owns a business or a professional practice, they may be subject to unreasonable demands from a spouse.
Someone who has never participated in the operation of the company may try to obtain a job there or an ownership interest in the business. Other times, they may simply make unfair economic demands on the spouse who intends to retain the business. People who own businesses are vulnerable to a double dip if they don’t review financial requests carefully.
What is a double dip?
A double dip occurs when one spouse makes two financial demands based on the same income or asset. A business or professional practice could easily be the most valuable single asset in the marital estate. It could be worth six or even seven figures.
Determining what the company is worth is an important part of the property division process. Different types of companies may require different valuation models. Some valuation models specifically integrate estimates of the future sales of the company when determining what the business is worth. In such cases, business income plays a major role in the value of the company and the overall division of marital property.
If the non-owner spouse also requests alimony, they may point to the future income of the business-owning spouse as justification for that request. However, that future income derived from business revenue has already influenced property division. It is unfair to factor that same revenue into economic matters twice during a divorce.
Business owners may need to be particularly cautious about how they establish a business’s value. They also need to watch out for a double dip in scenarios where their spouses request financial support. Having help when preparing for a high-asset, complex divorce can help business owners preserve their resources for the future. Those who understand common risks can more easily avoid them during divorce negotiations.
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