Divorce is a complex and often emotional process, but for business owners, the stakes are even higher. Beyond personal and familial concerns, business owners must also consider the potential impact of divorce on their livelihood, their employees, and the legacy they have worked so hard to build.
In New Mexico, where community property laws govern the division of marital assets, business owners face unique challenges that require careful planning and legal guidance. Below is a brief overview of some of the issues business owners may encounter during divorce, and a few examples of how Attorney Bob Matteucci addresses them.
The Intersection of Business and Divorce
As a seasoned family law attorney, former business owner, and divorcee, Bob Matteucci of Matteucci Family Law understands better than most people in the Albuquerque area what all is at stake when business owners get divorced.
In fact, going through the divorce process as a business owner is what inspired Bob to head back to school and become a lawyer. Before earning his J.D. with a concentration in Business Law from the University of New Mexico, Bob graduated from Tulane University with an MBA and was the owner of a profitable shoe store that generated over $5,500,000 in annual sales.
Bob’s past experiences mean he knows exactly how difficult it can be when family and business disputes become intertwined.
Asset Division Under New Mexico’s Community Property Law
New Mexico is a community property state. This means there is a presumption that any property acquired during the marriage is owned equally by both spouses. At divorce, the value of all this jointly owned property must be divided 50/50.
For business owners, this means their spouse may be entitled to a portion of the business, even if he or she was not directly involved in its operations. Figuring out if the business is part of the marital estate, what the business is actually worth, and how to divide that value up 50/50 is something Attorney Bob Matteucci can help with.
The first step is identifying and classifying all the business property as marital assets or separate business assets. This is easier said than done when most couples don’t keep the same sort of detailed financial records that businesses do. And it is further complicated by the fact that business growth and success is often tied to a family’s willingness to put valuable nonmonetary assets into the business — like time, support, and good-will.
Once all marital assets are identified, it is time to divide them up. If it were up to the court, everything would be sold off and the proceeds would be divided in half. But this simple solution isn’t the best way to maximize value or ensure both parties are secure in their post-divorce future. Bob knows this, so he instead lays out as many other options as possible.
- One tactic Bob has used to help business owners move forward is negotiating a buyout. Just like when one business partner buys out another, this allows the business to continue operating while the partner who is no longer invested in the business moves on to other things.
- Another option is allowing the spouse who is not interested in being involved with the business to take a larger share of the couple’s other assets. This could include the marital home, retirement benefits, or even some sort of ongoing spousal support payments (aka alimony).
- Couples who have diversified their portfolio by investing in multiple businesses, purchasing real estate, or buying other illiquid assets must divide up all of these things. The sometimes literal horse trading that it takes to split the value of this property can be overwhelming if you don’t have a business mindset.
- Division of assets, including business interests, can have significant tax consequences. Bob knows that bringing a financial planner or accountant to the negotiating table is often a necessary part of the process. He works hand in hand with these other professionals to ensure his clients’ interests are protected.
It takes an attorney like Bob, who has both negotiation skills and business insight to craft a divorce settlement that complies with New Mexico community property laws and fairly apportions the value of business assets in a manner that does not diminish their utility.
Business Valuation
The major sticking point in most divorces involving business assets is not who gets control of the business going forward. There is often one spouse that has no problem walking away from the company they and their partner built. The tricky part is determining how much the person walking away gets to walk off with.
The easiest way to do this would be to force the sale of the business and divide the proceeds. But that is like cutting off your nose to spite your face. It is often much better for both parties if the business can continue operating.
But putting a value on a going concern is easier said than done. Deciding how the business should be valued, then getting that assessment done are two key steps in the divorce process — and often two key areas of disagreement.
Bob has a good working relationship with a number of financial experts, forensic accountants, assessors, and other valuation professionals in the Albuquerque area. So no matter what method will be used to value the business, Bob can coordinate with them to ensure you, your soon-to-be-ex-spouse, and the business are treated fairly.
Operational Disruption
Divorce can disrupt the day-to-day operations of a business. Emotional stress, time spent in legal proceedings, and potential disputes over ownership can distract business owners from focusing on growth and management.
Thanks to his past business experience, Attorney Bob Matteucci can see these issues coming a mile away. He will not hesitate to draw your attention to them, and will brainstorm ways to address them. This could include:
- Doing a mediated or collaborative divorce that reduces conflict and focuses on moving forward.
- Establishing temporary plans for the business’s leadership and decision-making in case the owners are unavailable.
- Bringing in a business coach or other neutral third party who can identify where changes should be made to ensure the business continues to operate smoothly.
- Crafting a strategy for preserving employee confidence and loyalty as the business undergoes changes.
- Bob was the fourth generation of his family to work in the shoe business before heading to law school, so he understands the importance of succession planning. He can help ensure any long-term plans for passing the business to future generations is not destroyed by the divorce.
And this is just the tip of the iceberg. New Mexico’s divorce laws are flexible enough to bend to the needs of the business if the couple getting divorced is willing to work together for its benefit.
Protecting the Interests of Other Owners
The silent but not impartial third party in many New Mexico divorce cases is the new romantic partner waiting in the wings. But in divorces involving significant business assets, that third party is more likely to be a business partner than a paramour.
This is especially true in cases where the business is something like a medical practice, accounting firm, or law office where the financial security — and the professional reputation — of each partner is at stake. These business partners are often shocked and upset to discover their own interests could be impacted by someone else’s divorce.
In some cases, these other business partners must be bought out in order for the divorcing couple to finalize their split. This adds a layer of complexity that many divorce attorneys are ill-equipped to handle.
Protecting the Value of Real Estate Investments
Land is a hot commodity in the Albuquerque area, and with the way the real estate market has been acting the past few years, real estate holdings are often one of the sticking points in a divorce involving business assets.
Bob has seen ex spouses push for the sale of property in order to make a quick buck. And he has also worked with business owners who decide to move their operations as part of the divorce in order to separate the company from the land it sits on — viewing them as two separate assets.
No matter what path forward the business is on, it is wise to consider if the land it currently sits on should be treated as a separate asset.
Confidentiality and Reputation
High-stakes divorces involving business owners can attract public attention, which can in turn harm the business’s reputation. Sensitive financial information disclosed during proceedings may also risk client or stakeholder confidence.
As someone who has experience in both the business and divorce worlds, Attorney Bob Matteucci knows how to use confidentiality agreements and nondisparagement agreements — which can be signed by employees and incorporated into divorce agreements to protect his clients’ interests. With these legal documents in place, a divorcing couple can have more control over what personal or business information becomes public fodder.
Future Financial Security
For many business owners, their company is not just a source of income, it’s also a major part of their retirement plan. So, ensuring the business remains viable post-divorce is crucial for long-term financial security. Attorney Bob Matteucci knows this, so he always tries to negotiate an agreement that takes his clients long-term goals into consideration. He never pushes anyone to accept a quick resolution that ends up hurting more than helping years down the road.
Serving Families with Dignity & Compassion
While divorce is undeniably challenging, it can also be an opportunity for growth and renewal. By taking proactive steps to address the unique issues of business ownership, you can emerge from the process with your business — and your future — on a firm foundation.
Bob knows from personal experience what is at stake when a business owner is getting divorced. He is here to help you and your soon-to-be-former spouse navigate your separation while minimizing the impact it has on your business and your post-divorce life. Contact the Matteucci Family Law Firm today to schedule a meeting.