Attorney
Divorce is always a challenging process, but when a couple owns a business together, the complexities multiply. Dividing the value of the business 50/50, which is what New Mexico law requires, can make divorcing as difficult as any bitter custody dispute or messy love triangle.
If it were up to the court, the business would be sold off, and the proceeds split in half. But Attorney Bob Matteucci — who is himself a former business owner and divorcee — understands how impractical that solution is when a family has poured their blood, sweat, and tears into the business, and everyone’s financial health and future plans are tied to it.
Bob can help you navigate the divorce process, while protecting your company’s financial health, with careful planning, top-tier negotiation tactics, and a vision for what comes next. Below are twelve tips for couples who find themselves headed down this path.
1. Understand How Divorce Affects Business Ownership
New Mexico is a community property state, which means all marital assets—including businesses started or grown during the marriage—are presumed to be jointly owned and subject to division at divorce. This is true even if only one partner was actively involved in the business’s day to day operations.
2. Consider the Three Main Business Division Options
While all marital property, including businesses, must be divided up 50/50 at the time of divorce, you would be hard pressed to find a couple that has simply cut everything they owned in half. Rather than busting out a chainsaw, couples split the value of all of their assets. This can be done in a number of different ways.
- Liquidation — As mentioned above, if the courts had it their way, every divorcing couple would be forced to liquidate their assets and then divide by two. The simplicity of this solution disguises how devastating it would be.
- Co-Ownership — Almost as impractical as selling everything off is keeping everything as is and continuing to operate a business together post-divorce. This is only an option in the handful of cases where a couple’s professional skills complement each other to the point that doing anything other than sticking together as business partners would lead to financial disaster.
- Buy-Out — If one spouse wants to continue running the business, they can buy out the other’s share, just as they would buy out any non-romantic partner who wanted to leave the business.
- Trading Business Assets for Other Assets — When a buyout isn’t financially feasible, it is time to get creative with other assets or some type of alimony payment. This may mean one partner takes the business while the other takes the family home, vehicles, retirement accounts, or other assets.
Dividing your business isn’t the first step in the divorce process, but thinking about how you might approach the task will influence the approach you take to many other decisions you must make. Attorney Bob Matteucci can help you put this into perspective and begin to think about what your options are.
3. Get a Business Valuation Early
Before you can divide the value of something in half, you need to know how much it is worth. Bringing in a business valuation expert who can look at revenue, profits, market trends, but also put a price on intangible assets like brand reputation and goodwill is critical. And doing this early in the divorce process can stave off disagreements down the road.
4. Review any Preexisting Legal Agreements
If you and your soon-to-be-ex-spouse have a prenuptial agreement, or your business has a partnership agreement, shareholder agreement, or operating agreement, now is the time to dig those documents out and see what they have to say about how the business is treated during a divorce.
5. Separate Business and Personal Finances
Many married business owners commingle their personal and business finances, but during a divorce, it’s critical to separate them. Establishing clear financial records helps avoid disputes about what constitutes marital vs. separate property.
6. Set Boundaries Between Personal and Professional Life
While you are in the process of separating your business and personal finances, think about other ways you can separate your personal and professional life. Setting boundaries can keep the stress in your personal life from negatively impacting your business. And clearly defining work roles, responsibilities, and decision-making processes will help maintain stability in the business.
7. Maintain Professionalism and Communication
Fault-based divorce has not been allowed in New Mexico for decades, so there’s no reason to air private grievances during the divorce process. Keeping this information to yourself, and focusing on building a distant but cordial relationship with your former partner, will serve you better at the negotiating table than coming in with a flamethrower.
8. Protect Your Business’s Reputation
Except in the most extreme and rare circumstances, divorces are part of the public record in New Mexico. There’s no way to hide the fact that you and your partner are divorcing. But you can shield the nitty gritty details of the divorce from public eyes by hashing out the details of your divorce behind closed doors, incorporating nondisclosure and nondisparagement agreements into your divorce settlement, and avoiding public disputes or social media conflicts, that reflect poorly on you and your company.
9. Consider Hiring a Business Consultant
Don’t let your business suffer while you are focused on finalizing your divorce, consider hiring a business consultant who can help you identify tasks to delegate and other changes you can make that will ensure your business runs smoothly while you are distracted. A good consultant can also provide guidance on restructuring operations, leadership transitions, and financial strategies to ensure the company remains strong post-divorce.
10. Assess Tax Implications
The division of a business can trigger significant tax consequences. Selling a business, transferring ownership, or restructuring assets can impact capital gains taxes and personal tax liabilities. Consulting with a tax professional can help minimize tax burdens and avoid costly mistakes.
11. Plan for the Future
Divorce is not just about legally ending a marriage — it’s about forging a new path forward. Consider this an inflection point that gives you the flexibility to set new goals, land new contracts, and retool your business.
12. Work with a Divorce Attorney Who Understands Business Issues
Divorces involving business ownership require specialized legal knowledge. Working with an attorney like Bob Matteucci, who has a business background, and knows what you are going through because he has been there himself, can make all the difference when it comes to looking out for your interests.
Serving Families with Dignity & Compassion
Getting divorced while running a business presents unique challenges, but with the right strategy, legal guidance, and financial planning, you can negotiate a division of assets that positions your company for continued success while allowing you and your former partner to part ways.
Attorney Bob Matteucci is a business-minded family law attorney with years of experience in the boardroom and the courtroom. He is ready to help you navigate New Mexico’s divorce laws while helping you and your business focus on what comes next. Contact him today to schedule a meeting.