Professional success can complicate a marriage. People sometimes have to put their close relationships on the back burner while they focus on developing their careers. Small business owners, as well as those running independent professional practices, often have to put in long hours and commit a lot of their income toward developing the organizations they run.
Of course, the entire family of the business owner can benefit when their enterprises are successful. A small business can represent value on its own because of the assets required to run the business. It can also represent a continued stream of revenue. Therefore, business owners preparing for divorce often need to watch carefully for signs that their spouses have attempted to double dip during divorce negotiations.
What is a double dip?
A double dip involves leveraging the same resource twice for different economic purposes. In most cases, references to double dipping specifically apply to business owners. The other spouse requests a portion of the company’s value in the property division process. They also request alimony based on the future income that their spouse may receive from the business.
While that may seem logical initially, it can actually be an inappropriate and problematic approach to financial matters. There are multiple different types of business valuation methods, and several of them look at the revenue that a company may generate in the future. Simply put, the future earning potential of the business or private practice is part of the company’s value for property division purposes.
The spouse then requests that the courts consider that same future income for the purposes of alimony. Business owners can address this issue by using valuation models that look at assets, not income. They can also push back on requests for alimony in scenarios where a spouse has their own income or has already integrated the future earning potential of the business into property division negotiations.
Reviewing the economic proposals of a spouse at length with a skilled legal team is of the utmost importance for business owners who want to remain financially solvent after divorce. People who recognize that their spouses may try to claim the same resources or funds twice may achieve a better long-term financial outcome.