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For those of you with a business involved

Countingsheep65 posted 6/28/2020 19:04 PM

What do I need to be aware of?

What did it end up costing you for the divorce?

Did you have to hire a forensic accountant?

Did you have multiple partners in the business?

What do I need to know?

Attorney being hired tomorrow.

Chili posted 6/28/2020 19:40 PM

Hey Countingsheep:

I was one who had both a business and personal relationship to untangle. Meaning we were actually co-owners at the time.

Is your situation like that?

Or are you a business owner and looking to value the company as part of a divorce settlement?

I ultimately ended up hiring an internal dispute attorney to manage the business matters. It was horribly pricey. But I was also dealing with someone who didn't want to work, didn't want to leave, and wanted a gazillion dollars to even consider going away. So it was definitely a dispute.

My company had a CPA we had used since forming and he worked with MY attorney to value the company. They discussed all sorts of ways to value it that were way above my head.

I did not have multiple partners, but did have very clear articles of organization and operating agreement that came in very handy during the dispute.

How are you organized? LLC? Corp? Do you take a steady salary or draws?

Do you have a business attorney already for day-to-day consultations? You might consider giving them a call with a heads-up.

Some other things to be aware of:

If an outside party (a STBX or their attorney) is requesting information about your business that might be proprietary or confidential (clients, contract bids, pricing, etc.), then you would be wise to consider a confidentiality agreement of some sort. Another question for your current attorney.

And if it is your divorce that is requiring the business to spend time or money providing this information, you might consider how those efforts will be compensated.

Not sure any of this helps, but figuring out the business stuff for me was a particularly horrible part of the process.

I might be able to help provide more insight if there's other areas you're hoping to tackle.

Countingsheep65 posted 6/28/2020 22:17 PM

It is a LLC, but I donít even know anything.

There are three partners, we own I think 29% or 27% I would have to double check the papers.

Itís been going for 17 yrs. He keeps telling me he will just quit, but donít think that matters if we own that percent.

He makes a monthly salary and they each give themselves a little extra a month in the tune of $1,000 each. To which he told me a couple years ago they stopped getting, when in fact it never stopped, he just didnít want me to know about it and has been hiding/spending it.

I do not work for the business.

I do not know if there is a business attorney they go through.

This is not going to be good.

Countingsheep65 posted 6/28/2020 22:29 PM

Chili..

I like in your story how you said ďAmazing the resilience you find in yourself when you take that first little step off the ledgeĒ

This going forward will be what gets me through.

The1stWife posted 6/29/2020 06:42 AM

There are forensic experts who will value the business.

Tax returns can help.

Profit & Loss and balance sheets provide historical value. Projections of sales can provide future value.

I have a friend who has their own business. Going through a nasty D. Cheating spouse demanded outrageous things and valued the business at ďXĒ valuation. Hired the best forensic accountants. Company was valued at ďYĒ which was much less.

The cheater had to accept less.

Given you are only 1/3 owner you should recognize heís only entitled to a percentage of the value. Make him an offer to make it go away. See if he will accept it. Will save yourself $ and aggravation.

Chili posted 6/29/2020 10:44 AM

Hey CountingSheep - sorry I read your original post wrong thinking you were one of the owners of the business.

It depends on the State I'm sure, but most LLC's (even those with multiple members) usually pay taxes as a "pass through" which means you should be able to see what he makes very clearly on your personal tax returns. Not only his monthly "salary", but those extra "draws" of $1000 a month + his % of the other value of the company. (i.e. 30% of assets being depreciated, cash on hand, etc.) That should all be on your tax returns - usually in something called a K1 that outlines the business stuff. He can't hide that $1000/month unless they are evading taxes...so it should be there. I'm sorry he's been trying to hide that from you.

So I would recommend that you talk to your divorce attorney and he might recommend you meet with a CPA or forensic accountant to gather more information. Your attorney will know someone good. If the business is 17 years along, then you have a good track record to work with vs. a start-up. Can you start gathering your last 3 years or so of tax returns?

Him just "quitting" sounds like something he said in anger. To just "quit" an LLC would mean dissolution and a buy-out and cash payments, so I'm not sure what he's talking about there. He would just quit "working" there but still be an owner? Doesn't even make sense.

This may be much easier than you think. You not being a co-owner with him makes it a lot more straightforward. Just make sure you get your own team to do the valuing and make sure he isn't trying to bury the information.

LadyG posted 7/4/2020 08:29 AM

Itís actually my business, my WH is employed by me.

We are not partners but equal share holders.

He wants a guaranteed job and income after the divorce and if the business is sold, his dividends from the sale.

We are focusing on personal assets for now.

Anything could happen to the business down the track.

The business has been running for 25 years, so it has been a major part of our lives.

I have had friends who got very nasty and bitter about the business asset and itís true market value.

Muggle posted 7/4/2020 20:18 PM

My two cents for what it's worth. I'll only comment minimally as this is a complicated issue.

Profit and loss statements, bank statements, by laws and a valuation will be key.

We were supposed to have a "neutral" third party evaluate the business. He portrayed that the valuation was for a divorce instead of to sell. He made it seem as though the "neutral" party represented him alone. My attorney had to define the guidelines, and that he represented us both equally. Turns out my ex was the one that hired the guy instead of the attorneys. First red flag.

Once we got the man that was making the valuation on board, my ex was the only one with access the the documents provided. This was probably not in my best interests, as I he controlled the flow of information. We were in the middle of an offer for purchase, and I strongly believe that the numbers weren't accurate.

The valuation was on the lower side. Many red flags with the numbers. I hired a CPA to look at the numbers and there were many issues she brought up. We didn't have time to dispute it all unless I wanted to pay $6000+ for a separate valuation. His Quickbooks didn't appear to match his Misc expenses etc. He had put in "fuel" in QB to the tune of $330k but about 70% of those charges were actually checks to people. We never determined if it was horrid QB records or actually him fudging the books to show less profit. We never got to see the taxes for the business for the current years. He never produced many of the documents and had two different attorneys.

It cost me $1800 to get nothing noteworthy, as we didn't have time to get the business valued again. I didn't have money to hire a forensic accountant or he'd have been screwed. I had to pay my own attorney fees. We weren't married for 23 years, so not eligible for that part.

He had another business partner that was in theory being "bought out", but he took him off the paperwork illegally, and had been paying him a settlement amount monthly. His ownership was disputed but since he never filed any legal paperwork, the other owner surfaced during our divorce. He was given his ownership, which was deducted from my settlement. I suspect he figured out what my ex had done and threatened to sue him. He had taken an extended break from being in the business.

Needless to say this was a cluster fuck of trouble. I knew where the skeletons were, and I pointed them all out. I'd always stayed out of his business due to the way he ran things. I was squeaky clean.

I spent $25k plus on the divorce. I spent $1800+ on the accountant. I got a six figure settlement, the paid off house, and a bunch of other things. He didn't fare so well in the end.

He then sued me for millions and that cost me $10k more in legal fees. The case was dismissed with prejudice in Federal Court. He didn't win that either, but it cost me my savings.

Just know it will be tedious, expensive and exhausting. Concentrate on the big things, and the things that will net you money. Know where the line in the sand is for how much you're willing to spend, and make sure it's in line with what you stand to gain.


[This message edited by Muggle at 8:20 PM, July 4th (Saturday)]

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