A construction business or contracting firm can provide a family with income. While one spouse may do the contracting or construction work, the other may handle administrative matters, such as bookkeeping and managing the company’s project schedule.
If spouses decide to divorce, the process of addressing the company can be one of the biggest challenges that they face. The business may be the most valuable asset that the spouses own jointly, and there may be questions about shared interest in the company and the overall division of labor. Especially for those who may handle administrative matters, rather than the construction side of the business, there may be questions about legal rights and how to fairly address the value of the company at issue in a divorce.
What do spouses need to know when the marital estate includes a construction or contracting business?
1. The company is worth more than its assets
The spouse actually managing the construction side of the business has a better perspective on what the company is truly worth than the spouse handling the administrative side of the company. Unfortunately, the so-called “in-spouse” who has the skills and certification to work as a construction or contracting professional may undervalue the business to unfairly skew the property division process.
The company is typically worth more than the balance in its bank account, the value of the outstanding invoices and the tools that the company owns. Business goodwill established through a reputation with the community can also be highly valuable. The valuation process for the business should take the goodwill and reputation of the company into consideration.
2. Personal and business expenses matter
Family members might drive the trucks used for business operations outside of work. The business may pay for everyone’s cell phones and may even cover meals, such as lunches with other employees or clients. Determining what perks a spouse receives from the business can influence the final income calculated for them, which impacts their spousal and child support obligations.
3. In-spouses have the upper hand
The spouse who performs the construction work and has a professional license may feel entitled to control the property division process. They may insist the company isn’t viable without their labor or claim that the business has no value without their work, which means there is no business value to divide.
Spouses who provide administrative support at family businesses need accurate information about the law. Securing a fair outcome begins with gathering records, such as the last five years of business tax returns and profit and loss statements. Creating an inventory of business assets, including equipment, vehicles and valuable tools, is also helpful.
Finally, discussing the business and divorce concerns with attorneys familiar with the complexities of business owner divorce is important. A lawyer can provide insight into the law and assist with the process of retaining a forensic accountant to calculate the business’s value and assess the marital estate, which can lead to a genuinely fair outcome.