These shareholders were going through a business divorce. After 2.5 years, they spent over $250,000 in legal fees and they saw no end in sight. There was a lot of back and forth discussions yet they continued to cover the same grounds that were already discussed, many times over. Everyone was stuck in “the process” and no one knew where to go next.

The process they were using did not incorporate a negotiating strategy to help both sides move off the dime and make progress through the process. Nor did the process include a financial architecture so everyone could clearly understand what made financial sense.

Avoid a stalemate in a divorce

If you want to minimize your time, money and aggravation in the process, it is critical to incorporate these fundamental divorce management processes in your process. They will help you navigate around potential stalemates, among many other challenges that arise, in a divorce.

These shareholders arrived at a stalemate which could have been avoided. When people arrive at a stalemate the default path is to ‘go to trial’ and let a judge and/or jury make the decision for you. If this is the path you choose, or it has been chosen for you, be careful. In fact, be very careful. You will introduce another unknown process which you may not be able to control. If you are heading toward a trial it is critical to have everything tightly nailed down and properly positioned beyond the legal aspects of the divorce.

These shareholders were going through a business divorce which was, at the same time, intertwined with their personal divorce. The situation was as follows:

  • Jaymie and Robert were married to each other and in business together for over 10 years
  • They owned the business as equal shareholders
  • The business was their sole income which provided them an upper, middle class lifestyle
  • Jaymie kicked Robert out of the house
  • She also had Robert sign certain papers to relinquish his equity interests in the business

When Robert signed over his share of the business, Jaymie became the sole shareholder of the business.  She felt she could do whatever she wanted to do at that point in time.  Robert felt he signed the papers under much duress. It was not what he was expecting, but she had papers to prove something different. At least that is what she thought.

What was missed by everybody was the answer to this fundamental question: Was the effective date of separation before or after when Robert signed the paperwork to transfer his equity interests to Jaymie?

The answer was the effective date of separation was before the signing of the equity transfer occurred. This opened up an opportunity for Robert to reclaim and recoup his equity interests. Jaymie and her attorney defined the original date of separation when Robert left the house. The actual date was based on a simple checkbox on an individual tax return that indicated married filing separately. This announced to the world the couple had separated. This checkbox was overlooked. Yet it provided the necessary evidence to prove the effective date of separation.

When we saw it, we saw opportunity. We connected the dots in the overall financial framework and saw how this could and did, legitimately, positively shift the ownership interest in the business to Robert. The goal was to arrive at the financial truth. Regardless of what Bob felt was the truth, we needed evidence to get there. This simple checkbox shifted Robert’s equity interest from 0% back to 50% which he believed he rightfully owned in the first place. Now we had the evidence and could discuss the value of the business in context to the real life situation of what actually happened. This “digging process” is critical in these situations to arrive at the financial truth.

As financial architects we break down all of the issues into little pieces. We ask lots of questions that are not being asked or put on the table for discussion. After we find the answers to our questions we put everything back together again in a hierarchical and logical framework that makes financial sense. The effective date of valuation became one piece of evidence that created a line in the sand how much Robert owned at that point in time which impacted the value of his marital estate.

The effective date of separation should, and did, become the effective date of the business valuation. The effective date of valuation is a very sensitive date and must be selected carefully with clear thinking and evidence to support it.  Many people choose the most recently completed calendar year as the effective date of valuation. That date may be correct. Yet, if you do not use a diligent thinking process to select the effective valuation date you may find that you inadvertently established the wrong value for the business. Depending on which side of the table you sit on this may translate into leaving money on (or off) the table. Either way without clear evidence to support your rational it will create angst and make the process drag on unnecessarily costing you unnecessary time, money and aggravation.

The evidence positioned Robert to rightfully request payment for his equity interests. All of our work is grounded in evidence.  When we worked on the business valuation we created a piece of work that could be defended with clarity and confidence. The valuation was grounded in debits and credits so every one could follow the numbers with complete transparency. It might sound crazy, but using debits and credits in a valuation process is not common. In 2002 we added this extra process layer to ensure our conclusion of valuation made financial sense. Few professionals we know perform this “acid test” to validate their conclusion of value.

Jaymie originally presented a very low buyout price. She based her offer on the most recently completed calendar year which skewed her offer downward. Robert got angry as he perceived Jaymie was playing games in the process. His view was that he invested his life into the business and was relying on this investment for his retirement. Although his feelings may be justified, we still needed evidence to solidify his position. Once we had the evidence we could then figure out how to position it and communicate it too.

When we shared with Robert the effective date of valuation that gave him hope and some mental peace of mind that he might end up where he was supposed to originally. He saw we used a critical thinking process. All of the information held together tightly. You need a financial storyboard that is truly molded together to communicate the financial truth. Our financial storyboards have proven invaluable to bring about closure to tense situations like this one.

Our valuation process enabled everyone to follow the money flow and see why the value was what it was at that point in time. Our process unseated prior verbal understandings and communications that initially placed Robert in an unfavorable negotiating position.

There is much more to this story. In the end, our work effort translated into a 174% increase above the original offer presented. We also finished all of our work within about 3 months.

About the Author

Larry Smith is a Founding Partner of Divorce Outcomes, a specialized professional services firm that manages all of the financial aspects in a divorce process. Since 2003 he has worked as a trusted financial advisor, financial advocate, divorce architect and technical financial expert; he is not an attorney. He is an alumni of KPMG and Andersen with expertise in technical accounting, forensics, sophisticated taxation, management consulting, risk management, advanced process engineering, business combinations, divorce management, multi-party negotiations, advanced quality analytics and cognitive performance technologies. Since 1986 Larry has been advising individuals and organizations about innovative financial solutions to resolve complex financial challenges that arise in life and in business.

For both personal and business divorces, Larry is considered an expert in divorce strategies, divorce process management, financial divorce architecture, financial risk management, taxation for divorces, financial divorce forensics, advanced divorce analytics, financial divorce negotiations and mediation, business valuations and sophisticated equity structures. He helps clients shape complex financial decisions, manage communication risks and ever-changing negotiating positions to strategically preserve or grow wealth from these types of transactions.

If You Have a Question

If you have a question, feel free to contact me at [email protected] or 617-680-5222. The call is free. I will spend 30–60 minutes with you. I will provide you an honest assessment as to where I think you are positioned in your divorce process or answer any questions you have. I may provide you some guidance, insight or advice that you can take with you as you wish. There is no obligation to move forward. The phone call is designed to ease your fears, provide you some options to pursue and a potential road to run on that can lead you down a path to achieve a successful outcome.

About Divorce Outcomes

Divorce Outcomes is a specialty services firm that helps people both domestically and internationally manage all of the financial decisions that arise in their divorce process. We are not attorneys. We are financial experts who partner with our clients as their personal financial advocates. We help our clients manage their divorce process, uncover hidden financial risks, architect divorce solutions, manage ever-changing negotiating positions, communicate complex financial matters and close the divorce process as soon as possible with a goal to arrive at the best outcomes possible. Throughout the process we evaluate the current state of our clients’ financial lives with an objective to best reposition their future. We do not sell any products. We simply raise issues that are in our clients best interest. Our clients share with us we:

  • unfold, analyze and repackage their financial life so they are well positioned after their divorce
  • preserve the value of their business or marital estate
  • continuously strive to provide a return on our services
  • build balanced financial solutions grounded in evidence
  • find ways to make our client, and at times both parties, money through the process
  • design their divorce to work for them and their family’s life
  • provide mental clarity to make decisions
  • reduce the total process time from start to close
  • minimize the stress and unpleasant memories that can last a lifetime

As we reach an agreed upon settlement structure, we help our clients identify a fitting attorney who can leverage the financial solution to draft and record the requisite legal documents. Where outcomes are at risk from a traditional process, we function as expert financial negotiators or financial mediators to turn around the situation and achieve our client’s desired outcomes.

Learn more about us at or review our blogs to gain a clearer understanding about our approach and how we maximize the financial outcomes for our clients.


This communication is for general informational purposes only which may or may not reflect the most current developments. It is not intended to constitute formal advice or a recommended course of action as every person’s situation is unique and different. The information here is not intended to be, and should not be, relied upon by the recipient to make a decision without professional guidance.

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