Divorce when one of you owns the business.
An outfitter, a restaurant, a construction company, a dental practice: in Jackson the business is often the family's largest asset and its only income at the same time. Wyoming puts all of it before the court. A divorce has to answer what the company is worth, how much of that value belongs to the marriage, who keeps it, how the other spouse is paid, and how the business keeps running while those questions are argued. I have owned businesses and I have tried these cases, and the answers come from the books.
Call or text me. Clients get my cell number from day one, and I answer. Just been served? Here's what happens next.
Three things the statute settles.
Wyoming divides "the property of the parties," all of it, as "appears just and equitable," weighing the merits of the parties, the condition each will be left in, "the party through whom the property was acquired," and the burdens on it (W.S. § 20-2-114(a)). A company started before the wedding is before the court with its origin as a factor, not an exclusion. The separate property page explains why.
The court "may decree a specific sum be paid by either party" (W.S. § 20-2-114(a)), "may require security for obedience" to its property orders, and may enforce them "by attachment, commitment, injunction or by other means" (W.S. § 20-2-112(a)). That is the legal frame for a buyout paid over time under a note.
The court may compel either spouse to answer under oath about "his property, rights or interests, or money that he may have or money due or to become due to him from others" (W.S. § 20-2-112(a)). An owner who controls the books does not control the case. The Rule 26 disclosures require the company documents within a month of the answer.
What the company is worth.
The appraiser and the three approaches
Nobody in the courtroom knows what the business is worth until a qualified appraiser says so, and in a contested case there are usually two. The income approach is the workhorse for a going concern: normalize the earnings by adding back the personal expenses run through the company and subtracting a reasonable salary for the owner, then capitalize what is left at a rate that reflects the risk of a small business in a resort town. The market approach prices the company against sales of comparable businesses, which exists for a restaurant and barely exists for a heli-ski operation with a permit nobody else holds. The asset approach is the floor, equipment and real estate less debt. A good report says which approach fits and why; a bad one picks the approach that produced the number the client wanted. Judges can tell. My post on business valuation in divorce covers the methods in more detail.
Goodwill, and whose it is
The number above the hard assets is goodwill, and it is where most of the money is argued. Enterprise goodwill is the company's: the name, the lease, the permits, the booking system, the crew that shows up, the contracts that renew. A buyer would pay for it. Personal goodwill is the owner's: the reputation, the relationships, the hands that do the work, and it leaves when she does. The first is property the court can divide. The second looks like the owner's future earnings, which are income rather than an asset, and counting it as property is the surest route to paying twice. Each case turns on the experts' ability to show how much of the goodwill would survive the owner's departure. A one-dentist practice and a twelve-guide outfitter with a thirty-year permit sit at opposite ends of that question.
- 01On request, a restraining order against transfers outside the ordinary course of business; the company keeps operating
- 02Rule 26 disclosures within a month of the answer: operating agreement, two years of company returns, the latest balance sheet
- 03Discovery to the company: general ledger, bank statements, payroll, accounts receivable, the owner's loan account
- 04A valuation expert on each side, or one agreed neutral; a forensic accountant where the books and the lifestyle disagree
- 05The owner's reasonable compensation fixed, separating income for support from value for division
- 06Mediation if either spouse asks, with both reports on the table; most business cases settle here on a sum and a payment schedule
- 07The decree: the company to the operating spouse, a specific sum to the other, secured by a note, offset against the other assets
A valuation is a snapshot as of a date. In a seasonal business the date matters, and the appraiser should be told whether the balance sheet is being read in April or September.
Who keeps it, and how the other spouse is paid.
- The operating spouse keeps the company. Courts do not leave divorced spouses as co-owners of a going business, and rarely order a sale if there is another way to pay. The spouse who runs it is awarded it, with its debts, and the other is awarded a share of its value in other property or in money.
- The buyout. Where the other assets cannot offset the company, the court decrees a specific sum, payable over years under a promissory note with interest, secured by the business, its real estate, or a lien on the home, with acceleration on default. The home buyout page covers the same structure for the house, and the two are often traded: the house to one spouse, the company to the other.
- Income and value, kept apart. The owner's reasonable compensation is income for child support and alimony; the return the business earns above that is value for division. An appraisal that capitalizes all the earnings and a support order that counts all the same earnings is double-dipping, argued under the same "just and equitable" standard that divides the property. The income page covers the add-backs.
- The partners and the paperwork. An operating agreement with a buy-sell clause or a valuation formula informs the court even though it did not sign it. A prenuptial or postnuptial agreement that addresses the business is the one document that can settle most of this page in advance; the prenuptial agreements page explains what one can do.
Running the company during the case, Jackson businesses, and the court.
The asset restraint and the ordinary course, the non-owner spouse's case, the businesses this valley runs on, and Teton County practice
The restraining order and the ordinary course
On request the court enters a temporary order restraining both spouses from transferring, encumbering or concealing property in a way that would defeat the decree, and in Teton County that order is entered immediately when asked for. It does not stop the business. Payroll runs, vendors are paid, the usual owner's draw continues, and the season goes on. What it stops is the unusual: a raise the owner has never taken, a bonus to a new partner, a deferred invoice so collections look thin at the valuation date, equipment bought on credit the week before the appraisal, a loan to a relative, a distribution that empties the operating account. Each turns up in the forensic accountant's report as a departure from the prior three years, and the court can treat the money as if it were still there when it divides the property. Run the company exactly as the last three returns show, and send the monthly statements to counsel. The temporary orders page covers the restraint and the support orders that run alongside it.
If you are the spouse who does not own it
You are entitled to the books, and the first job is getting them. The Rule 26 schedules require the operating agreement, two years of company returns and the latest balance sheet within a month of the answer; discovery reaches the ledger, the bank statements, the payroll, the receivables and the owner's loan account; the court can put the owner under oath about money owed to him by others. A spouse who has watched the household live on more than the tax return shows is usually right. Your own contribution counts too: years of unpaid bookkeeping, the front desk, or the home kept while the company was built are part of "the respective merits of the parties" the statute weighs. The hidden assets page covers the tools when the owner will not produce.
The businesses this valley runs on
Jackson companies have features generic valuation guidance misses. An outfitter's value sits in a federal permit that cannot be sold apart from the business and may not transfer at all. A restaurant's value depends on a lease in a market where the lease is the hardest thing to get. A contractor's receivables swing with the building season, and March tells a different story from August. A professional practice carries goodwill that is mostly personal and a referral base that is mostly local. The appraiser has to know the valley or be taught it, and the valuation date has to be chosen with the season in mind. Where the business is one of several large assets, trusts and family money among them, the high-net-worth page covers the wider case.
In Teton County
Every divorce in the county is heard by one district judge, and a business case meets her procedures early. The scheduling conference, run by her judicial assistant by phone, asks whether the Rule 26 disclosures are complete, and company documents are the ones most often missing. Discovery disputes usually go to a special master on an expedited response period, and an owner who answers requests for the ledger with boilerplate objections should expect sanctions. Mediation is ordered if either spouse asks, and business cases settle there more often than they are tried, because a trial means paying both appraisers to testify. A note the court decrees is enforced by contempt afterward; the enforcement page covers that. The court sits in temporary courtrooms at 250 East Simpson Avenue; the courthouse page has the details.
What business owners ask.
Will my spouse get half of my business?
How is a business valued in a divorce?
What is goodwill, and does it count?
Can I keep running the business during the divorce?
What is double-dipping, and why does my spouse's lawyer keep saying it?
How is the buyout actually paid?
Start with a confidential conversation with Aaron Herzberg.
A consultation is a scheduled working session, in person in Jackson or by video, in which we go through your situation and I tell you what I would do. It is a paid working session, not a sales pitch. The fee is quoted when we schedule. Your note reaches me directly, my office runs the conflicts check and puts the meeting on my calendar, and you can call or text any time.
40 E Simpson Ave, Jackson, WY 83001 · by appointment · video consultations for out-of-state clients · info@puzzlegroup.com