People navigating unusual circumstances may have special issues to address during divorce proceedings. Business owners have significant personal responsibility that comes from running an organization. They often earn competitive wages due to their hard work.
If they or their spouse files for divorce, they could face a variety of challenges. Business owners often have more assets and debts to address than the average divorcing spouse. There may be challenges with unpredictable income as they attempt to negotiate matters regarding child support if there are children in the family.
There are also unique financial issues that can prove problematic when business owners divorce. For example, they are at risk of putting themselves at a financial disadvantage by making unnecessary concessions. When looking at property division and alimony or spousal support, business owners may sometimes fall victim to a double dip that benefits their spouse at their expense.
What is a double dip during divorce?
A double dip counts the same assets twice when separating financial resources and obligations during a divorce. A double dip involves using the value of the same resource more than once while setting financial terms for a divorce, which puts one spouse in an unfair situation.
Typically, a double dip in a divorce involving a business owner relates to the future income of the company. There are certain business valuation methods that specifically factor in the future revenue produced by the business to determine what it is worth for the purpose of property division.
A double dip could occur if spouses use a valuation method that considers company revenue and then use the same income when calculating spousal support obligations. The spouse who owns the business may compensate the other spouse twice for the same future revenue.
Thankfully, there are multiple different business valuation methods that people can use to prevent a double dip from occurring during property division proceedings. In some cases, business owners may also be able to successfully counter the assertion that they must provide spousal support, as their spouse may be capable of supporting themselves.
Understanding the unique challenges that manifest during a business owner’s divorce can help people avoid lasting financial setbacks that persist for years after a marriage ends. Business owners should not have to compensate their spouses twice for the same business revenue. Those who are aware of the risks can protect themselves and their companies from unfair divorce outcomes.
