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 from a seasoned attorney like Bob Matteucci. This page walks through the practical mechanics of what the divorce process actually looks like when you’re a business owner: how the business gets valued, what happens with debt and other owners, how settlements typically get structured, and how Bob tackles these issues.
The Intersection of Business and Divorce
Whether you or your family owns a manufacturing facility, a medical practice, a restaurant group, a consulting firm, or you have a portfolio of rental properties, going through a divorce is going to fundamentally change the way you do business.
Bob Matteucci understands this better than any other family law attorney in the Albuquerque area because he was a business owner long before he ever thought about becoming a lawyer.
After realizing divorce meant he would be the fourth and final generation to run his family’s retail shoe business, Bob went to law school to become the kind of attorney he wished he had at his side when navigating New Mexico’s family court system.
Bob knows how to read financial documents. He’s been the one trying to figure out how to make it through Q4 with so many unanswered questions impacting the business. And he appreciates that selling everything off and dividing the proceeds 50/50 is not the best path forward.
The 50/50 Split
Under New Mexico’s community property law, every asset that is acquired by a couple during their marriage is presumed to be jointly owned and is subject to equal division at divorce. If assets that you owned before you walked down the aisle have increased in value, that increase may also be considered marital property.
This includes businesses. It doesn’t matter whose name is on the legal paperwork, who originally founded it, or who runs it on a day-to-day basis.
Our state’s law was written this way to emphasize the fact that marriage is a partnership, and the work of each spouse matters. Some couples are equal contributors, others have one spouse who carries the business while the other ensures they are able to do so by making their home run smoothly. This system works well when the people getting divorced are W2 employees. But it is a bit of a challenge when the spouses are business owners.
The simplest way to solve this problem is to sell everything off and divide by two. Our family court judges would like that because it would make their jobs easier. Some family law attorneys also fall in that camp.
Not Bob Matteucci.
Bob knows liquidation is not the only way to restructure a business. And that’s what divorcing with a business really is. It’s restructuring a business, along with every other asset a couple owns.
Future Financial Security
No matter how much they disagree about other issues, most business owning couples understand that the business needs to stay afloat if they want to move forward.
The business supports the entire family. It pays for college and puts money in retirement accounts. Continued operations are what’s going to pay for the divorce and the changes that flow from it. It’s a pillar of the community, and something employees and clients or customers depend on. Shutting down is not an option.
Bob understands this. So he helps business owners figure out a different path forward. Most of the time, this ends up looking like:
- A negotiated buyout, where one spouse is paid for their interest while the business continues operating under the other spouse’s ownership.
- A structured payment plan may be useful when the business doesn’t have the liquidity to pay out a lump sum without disrupting operations.
- An asset offset, where the non-owner spouse receives a larger share of other marital property (the house, retirement accounts, investment holdings) and/or spousal support payments (aka alimony) in exchange for their interest in the business.
Which option makes sense depends heavily on the business’s cash flow, its debt load, and what both spouses actually want their financial life to look like post-divorce.
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.
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.
- Income-based approaches capitalize or discount the business’s future earnings.
- Asset-based approaches total up the fair market value of what the business owns.
- Market-based approaches compare the business to similar companies that have recently sold.
Each approach can produce materially different results, and each has its legitimate uses depending on the nature of the business.
And the nature of the business can matter a great deal. Professional practices, like medical and dental groups, law firms, accounting practices, and consulting businesses, are often the hardest to value because so much of their worth is tied up in goodwill. The reputation of the owner, referral relationships, and client trust that don’t show up cleanly on a balance sheet, but goodwill can be extremely valuable.
Bob’s MBA degree and business experience give him a real head start engaging with this material, but he doesn’t rely on that alone. He regularly works alongside forensic accountants, assessors, and other financial experts to make sure the assumptions behind a valuation are sound, and to push back effectively when they’re not.
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, so he understands the importance of succession planning. He can help ensure your long-term plans for passing the business to future generations are 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.
This adds a layer of complexity that many divorce attorneys are ill-equipped to handle because:
- Other owners may need to be bought out, or brought into the negotiation. In some cases, resolving your divorce requires restructuring how other partners are compensated or bought in, particularly if a settlement would otherwise force a change in ownership percentages they didn’t sign up for.
- Existing buy-sell agreements often control more than people expect. If your business already has a buy-sell agreement, it may dictate how a departing owner’s interest gets valued or transferred. That language can directly shape your divorce settlement, for better or worse. Reviewing it early avoids surprises later.
- Confidentiality matters to more than just you. Building non-compete, nondisparagement, and confidentiality agreements into your settlement can help protect sensitive financial information from becoming public.
Business Debt and Personal Guarantees
Business debt doesn’t disappear in a divorce, and it doesn’t always divide the way people expect. Loans, lines of credit, and equipment financing tied to the business may carry personal guarantees that follow you individually, regardless of who ends up with the business. Untangling which debts are business obligations, which are community debts, and which carry personal exposure for one or both spouses is a necessary part of any accurate settlement.
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 since they can be considered two separate assets.
Calculating Income as a Business Owner
For business owners, “income” is often a moving target. Tax returns may show one number. Cash flow may tell a different story.
Owner draws, retained earnings, business expenses that overlap with personal ones, depreciation, and compensation that has been strategically suppressed to reinvest in growth, all mean the gap between what a business owner earns on paper and what they actually have available is often significant.
This creates tension in divorce proceedings because New Mexico’s child support guidelines tie these payments directly to income. Income is also a key factor courts consider when determining if spousal support payments (aka alimony) is appropriate, and if so, how much should be paid.
Bob Matteucci’s business background means he understands how an owner’s income actually flows. He can spot figures that are inflated or deflated from a mile away, and knows what evidence will back up his hunch.
If you are the business owner worried about support obligations being calculated on an inflated income figure, or the non-owner spouse concerned that the business income picture is being deliberately obscured, Bob is ready to get in the financial weeds and figure out what is really going on. Because ultimately, support obligations must be grounded in reality.
Frequently Asked Questions
Every family and business are different, so one divorce will never look exactly like another. However, many of our clients in the Albuquerque area share similar questions about the process. The following FAQs answer common questions about what divorce looks like as a business owner. The answers may help you shape the discussion you want to have with the Matteucci Family Law team.
Will I be forced to sell my business?
If you can’t reach an agreement outside of court, New Mexico family court judges have the authority to order the sale of your business. That’s a strong incentive to settle, so the vast majority of business divorces resolve through a negotiated buyout, asset offset, or structured payment plan that keeps the business operating.
How is my business valued in a New Mexico divorce?
Typically through a financial expert applying an income-based, asset-based, or market-based method (or some combination). The right method depends on your business’s structure, industry, and financial history. This is often the most contested part of the case when business owners divorce.
What happens to my business partners if I get divorced?
It depends on your ownership structure and any existing buy-sell agreement. In many cases, partners are unaffected beyond providing financial documentation. Sometimes other partners must be bought out before a couple can finalize their divorce.
How is my income calculated if most of it comes from distributions, not salary?
Courts look at actual income available to you, which may differ meaningfully from what a tax return shows. Owner draws, distributions, and compensation strategies tied to business reinvestment are all part of that analysis, whether the question is child support, spousal support, or negotiating leverage.
How long does a business owner’s divorce typically take?
The length of your divorce depends more on your attitude and willingness to work toward a solution than anything. Handled collaboratively, many resolve within a few months. Contested cases involving dueling experts and court proceedings can take a year or more.
Should I use mediation or litigation for a business divorce?
For many business owners, mediation or a collaborative divorce is worth serious consideration. Traditional divorce is an adversarial process, and that is not always conducive to the sort of creative settlements that business ownership requires.
Serving Families with Dignity & Compassion
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 and discuss your case.