Mediation and Valuation: Addressing the Value of a Business Established Before Marriage

For business owners going through divorce mediation, one of the first questions to consider is whether a business owned before marriage should be divided. Many owners assume that the business is entirely separate property and should not be considered in the settlement. However, the valuation of a pre-marriage business can be more nuanced, especially when its value has changed during the marriage.

Separate Property or Marital Property: What’s the Difference?

In divorce mediation, determining which assets are separate and which are marital is crucial. Separate property typically includes assets acquired before the marriage, such as a business that was established prior to the wedding. However, the appreciation or income generated by the business during the marriage may be considered marital property, subject to division.

For example, if a business was worth $100,000 when the marriage occurred but is now worth $300,000, the $200,000 increase in value might be considered marital property. Income earned by the business during the marriage, whether reinvested in the business or taken as distributions, could also be classified as marital property.

The Role of Business Valuation in Divorce Mediation

In divorce mediation, a business valuation expert plays a key role in determining the value of the business and identifying what portion is separate versus marital property. The expert will examine various factors, such as the business's growth during the marriage, any reinvestment of earnings, and the level of involvement the owner had in the business. They will also determine whether the income or appreciation of the business can be classified as separate or marital property.

A mediation-focused valuation expert will also assist in negotiations, helping both parties reach a fair resolution. By providing an objective valuation of the business, they can help ensure that the division of assets is equitable.

Can a Pre-Marriage Business Be Divided in Mediation?

While a business owned before marriage is typically considered separate property, mediation offers flexibility in how assets are divided. If the business has grown or generated income during the marriage, a portion of its value could be treated as marital property. Through mediation, the couple can negotiate how the business should be handled, whether through a buyout or an equal division of other assets to account for the business's value.

In mediation, business owners can work with the other party to come up with a solution that avoids litigation. A buyout, for example, might allow one spouse to retain ownership of the business, while the other is compensated with a portion of the marital estate.

Navigating Divorce Mediation with Professional Support

Mediation can be an effective way to resolve disputes in a divorce, especially when a business is involved. Working with a professional who understands both the business valuation process and the mediation process can help ensure a fair and reasonable division of assets.

If you’re a business owner going through divorce mediation, contact Valuation Mediation to get expert guidance on the business valuation process. Our experienced team can help you navigate this complex situation and achieve a resolution that works for both parties involved.