A business may be a person’s largest asset included in their marital estate at the time of a divorce. This business may also be the family’s primary source of income, and necessary to continue after the divorce is finalized.

The value of the business and the income that it generates for a family will have significant impact on the issues of a final property settlement, child support and alimony. Both parties in a divorce proceeding should ensure the business can continue to operate and be profitable once the divorce is finalized.

For these reasons, it is important that the value of your business is safeguarded before, during and after your divorce. Below are two considerations to help protect this asset to continue to provide for you and your family.

1. Plan accordingly

If you own a business before getting married, a prenuptial agreement can set out the parties’ future rights and responsibilities to the business in the event of a marriage breakdown. It may also set the terms of a property settlement and support payments if the marriage is ended. This may protect the value of the business and brings some certainty to the divorce process.

If no prenuptial agreement is in place at the time if the marriage, New Hampshire also recognizes post-nuptial agreements as enforceable. A post-nuptial agreement will allow the parties to negotiate a fair resolution to the distribution of marital assets should the marriage ultimately end.

Ultimately, a pre- or post-nuptial agreement can define the parameters of a fair market value (FMV) determination, which will reduce the time, expense and contentiousness of competing experts in your divorce.

2. Understand the value of your business

The court will look at the FMV of the business to establish what each parties’ interest is in this asset. FMV of the business is determined through the expert testimony of a forensic accountant, who investigates the different aspects of the business and gives an opinion of the FMV based upon their training, experience and industry standards. Oftentimes, a party mistakes other financial metrics for the FMV.

Once the FMV is established or agreed upon, the challenge becomes how the non-owning party is compensated for their interest.

This could be through an offset of other marital assets owned by the parties or regular payments through the business to the other spouse.

In a worst-case scenario, the court could order that the business be sold and that the proceeds be divided between the parties.

If your family owns a business and are contemplating a divorce, it is important to consult with an experienced legal professional regarding all your options to protect and maintain your biggest financial asset.

David Tencza and Jacqueline Leary are attorneys in McLane Middleton’s Family Law Practice Group. David can be reached at david.tencza@mclane.com or 603-628-1284 and Jacqueline can be reached at jacqueline.leary@mclane.com or 603-628-1178.

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