What a Mississippi Business Owner Needs to Know About Divorce
You have worked tirelessly to build your business from the ground up, or you stepped into a family operation with a generational history of success. Maybe you spent the better part of two decades in school honing your professional skills, and you are only now reaping the benefits of your efforts. You admit your focus on the family has not always been what it should, or you have graciously sat on the career sidelines while your spouse was the primary wage earner and you took care of the kids.
Regardless the situation, ownership in a business creates complex issues requiring the right professional guidance
As a business owner, you may have flexibility in your schedule when it comes to co-parenting arrangements. You don’t work 9 to 5 and you need your custody schedule customized for your lifestyle. When it comes to financial support, sure you have the advantages of being a business owner, but there is also uncertainty about your income from year to year. This year you may have a huge spike based on one-time circumstances. The next you may experience a record low. This kept you up at night before the wheels fell off your relationship, and the pressure is only squeezing harder now that everything is different. You have made mistakes in business and in life, but the potential for life altering trajectory has never been higher.
Another challenge of a business owner in Mississippi facing divorce is the valuation and division of the business itself. Because businesses are income producers, they usually should not be taken apart and divided like a 401(k). Also, while certain types of businesses are bought and sold every day in Mississippi, others have limited value outside the professional’s reputation. Additional challenges exist in closely held family companies that have been around way longer than your marriage. Whether you work in the family’s business, or you spend your time and energy on other endeavors, Mississippi has a unique legal stance when it comes to business owners who divorce.
More than any other area of family law, the reputation and experience of your counsel is of paramount importance. At R+E, phrases like “fair market value” and “goodwill” are a part of our everyday vernacular. Forensic accountants, private investigators and tax attorneys are on our speed dial for our business owner clients.
According to the Mississippi Supreme Court, the value must be determined on a “fair market value” basis and the only approved valuation methodology is the Net Asset Approach, which calculates the value of the assets and liabilities with no entity or personal goodwill, but with appropriate discounts related to marketability and control. The valuation date is set by the Court. All of this appears simple. However, it can quickly become complex if a spouse owned a business or practice prior to the marriage, inherited a business, or acquired or sold a part or all of a business during the marriage. These events might lead to issues such as value appreciation, commingling of assets, or transmutation that must be carefully analyzed. Jim Koerber, Certified Valuation Analyst