The division of property during divorce can be one of the most contentious parts of the process. Whether you’re dividing something small like valuable artwork or something more substantial such as your family home, you may face challenges in coming to an agreeable solution with your ex-spouse.
Some assets are even more complicated, too. If you own a business at the time of your divorce, it may be eligible for division as well. No matter the type of business, it’s essential to know what to expect.
Is your business marital property?
One way to ease concerns over dividing your business is determining whether it’s marital property. Also known as “community property,” marital property is as it sounds – the assets you owned with your spouse together during your marriage. These assets include the aforementioned items such as the family home and valuable artwork, and assets like vehicles, summer homes, boats and furniture.
If you and your spouse started your business together, it’s most likely marital property. If your spouse had any hand in your business – as an employee or investor – the business might be marital property. If your company’s profits financially supported your spouse, or your spouse had access to profits to use as they pleased, your business may be marital property.
When your spouse has a connection to the business, they may have the right to claim a percentage of its value during the divorce.
What can you do?
If you’re already married, then it’s too late for a prenuptial agreement which can protect your business in the event of a divorce. Postnuptial agreements may provide you an opportunity to keep some of your business out of your spouse’s hands. Barring these options, however, there are three common routes available:
- You keep the business. If you started the business before marriage, or you love the company and don’t want to end it, you can keep the business by offering to buy-out your spouse. You can do this financially or offer to “trade” other significant assets in exchange for the business, such as giving your spouse the family home while you keep the company.
- You sell the business. Selling the business allows you to receive and split the value of the business evenly between your spouse. It’s an ideal choice if you decide you no longer want to continue the business.
- You remain co-owners. If you own the company with your spouse, remaining co-owners may be an option if the others don’t pan out. It can be tricky to run a business with an ex, but it’s possible if you plan it carefully.
Dividing a business can be a challenging and even emotional process. As you’ve put years of hard work into your business, you don’t want to give any part of it away. A skilled lawyer can help you reach a resolution that’s sure to satisfy everyone.