For the past several years, couples have witnessed the growth in popularity of digital assets. From entertainment collections to online consumer rewards, a married couple can amass valuable assets that have no physical counterpart. Unfortunately, when divorce becomes a reality, the couple must assign a value and divide these assets just like physical property.
With so many digital platforms available, it is not uncommon for couples to build a business online. With e-commerce platforms such as eBay, Marketplace and Shopify, starting an online business is easier than it has ever been. Couples will put significant time and effort into building their online presence, a helpful customer history and positive reviews. The challenge, then, is reaching a compromise on the business valuation and determining how it can be divided when there are limited tangible assets.
How is a traditional business divided?
With a traditional brick and mortar business, the couple must agree on a value and then decide what to do. The value is generally based on the tangible assets such as real estate, equipment and staff. The online business, however, does not have these same assets.
With the negotiated value in place, the couple must decide how the business will be distributed:
- Sell the business and split the profits
- One partner buys out the other partner
- Continue to run the business together post-divorce
Just like a traditional business, these are the same options available in an online business. The challenge lies in the couple arriving at a business valuation. The value of an online business will likely be anchored by the revenue stream, inventory, debt, intellectual property and operating costs. Additional intangible assets such as time spent building the business and the effort required to maintain customer relationships might be a factor.
Over the course of a marriage, a couple will likely amass numerous assets. From physical assets such as the matrimonial home and vehicles to financial assets such as a stock portfolio and retirement funds, the couple must thoroughly evaluate all assets to reach an accurate property division. Couples might find that evaluating digital property in a divorce could contain an additional layer of complexity. When an online marketplace is included, the couple will likely realize there are future profits at stake.