Divorcing a Connecticut business owner involves three parallel exercises: valuing the business, determining the owner-spouse's income for support purposes, and ensuring complete disclosure of business-related compensation and perquisites.
Valuation is performed by a credentialed business appraiser — typically holding an ASA, CVA, or ABV designation. The appraiser selects an approach (income, market, or asset-based) appropriate to the business. For service businesses and professional practices, income approaches (capitalization of earnings or discounted cash flow) are most common. For asset-heavy businesses, an adjusted-book-value or asset approach may apply.
Owner compensation often differs from the salary reported on a W-2 or K-1. Personal expenses paid through the business, vehicle and travel allowances, deferred compensation arrangements, and retained earnings are all examined. A 'normalized' compensation figure is often calculated for both valuation and child-support / alimony purposes.
Disclosure in a business-owner divorce reaches beyond the personal financial affidavit. Discovery typically includes three to five years of business tax returns, general ledgers, accounts-receivable aging, fixed-asset schedules, bank statements, loan agreements, key-person insurance policies, and any buy-sell or operating agreements. A forensic accountant is often retained to analyze the materials.
The non-owner spouse's interest in the business is typically resolved through a buyout — either lump-sum, structured over time, or offset against other marital property. Continued joint ownership is rare and usually unworkable. The structure of the buyout has tax and security implications that should be addressed in the dissolution agreement.
This article is for general information only and is not legal advice. For guidance on a specific matter, contact the office.