How Is a Business Acquired During a Marriage Handled When Divorcing?
When couples divorce, the assets and debts acquired while legally married must be divided up according to state laws and court decisions. Figuring out how to split up a business shared during the marriage can be trickier than deciding who gets to live in the marital home or who gets the furniture. Some spouses lose their business in divorce, but this does not always have to happen.
Many business owners who plan to marry set up prenuptial agreements to protect their companies. It might also be wise to keep a spouse separate from the business by not involving them in the daily and long-term operations. Many couples who own businesses together have solid, fruitful partnerships, but other times, this is the main cause for the separation. When a business owner does not take steps to guard their company against a possible divorce, it could be put at risk.
Marital property includes all property gained throughout the marriage, including businesses that were invested in and purchased. This can hold true even if only one spouse’s name is on the business ownership documents. Separate property is assets owned prior to the marriage, but courts often consider a business as jointly owned when both spouses contributed to the operations.
Even when a property is categorized as separate in divorce proceedings, a spouse can still attempt to claim an interest in it. This can happen with businesses, homes, cars, and other valuable assets. To complicate matters further, the assets held in a business might include the property, money, vehicles, patents, and trademarks.
Once a court determines that a business is a marital property, the asset will be valued. Some divorcing couples might agree on the amount. Each side can hire an independent qualified valuation professional, like a certified public accountant or an accredited senior appraiser, to do an analysis. If the two determinations are conflicting, a judge might have to make the final decision.
Once the business is valued, the court will likely look at other factors, such as:
- If a spouse borrowed money from family funds to support the business.
- If the business existed prior to the marriage.
- The percentage owned by each spouse.
- The value that each spouse brings to the business.
- Whether or not both spouses were involved with the business.
It is possible but not as likely for couples to continue being co-owners and run businesses together after being divorced. When that is not possible, there are two other solutions:
- Sell the company. This can happen when both spouses agree to do so, but there can be issues with making the sale, especially the listing price.
- Buy out the other spouse. This is the more common choice. The business assets are transferred to one spouse and the other receives appropriate compensation for opting out.
Marlton Divorce Lawyers at Goldstein & Mignogna, P.A. Can Help Protect Your Business Assets in Divorce
Complicated divorces that involve business assets require legal experience and tough negotiation skills. Contact our Marlton divorce lawyers at Goldstein & Mignogna, P.A. to learn more. To schedule an initial consultation, call us at 856-890-9400 or complete our online form. Located in Marlton, New Jersey, we serve clients in South Jersey, including Marlton, Burlington County, Camden County, and Gloucester County.