Dividing a business during divorce can have lasting impacts on both parties’ financial futures as well as the business itself. What details might influence what happens to a company?
1. Who owns the business
If one spouse solely owns the business and started it before their marriage, the court will likely consider it their separate property. However, the increase in value of the business during the marriage could be subject to division. If one spouse started the business after the couple married, on the other hand, the company might fall into the category of marital property.
If both spouses have shares in the business, the division becomes more complex. The court may consider each spouse’s contributions to the business and the amount of the business they own.
2. Whether you have a prenuptial agreement
If there is a prenuptial agreement in place that includes provisions for the business, this can heavily influence the court’s decision. These agreements often designate the business as separate property. In some situations, a prenup may provide guidance on how to divide the business during divorce.
3. How much the business is worth
Determining the value of the business is a crucial step. Appraisers may use different valuation methods to determine how much the company is worth. These may be based on market conditions, income or the assets owned by the company.
The value of the business can determine how much of the non-business marital assets each spouse receives. The value of the company may also determine whether one spouse has the ability to buy out the other’s stake in the business.
4. Who contributed to the business
The court will consider both direct financial investments and indirect contributions, such as supporting the household while one spouse focused on the business. Non-monetary contributions, like business management or development of client relationships, may also be a consideration during property division.
5. What each spouse wants for the business in the future
Each spouse’s desires for the business could influence what happens to the company. If neither spouse wants to run the business together or one spouse does not want to keep their stake in the company, one spouse may buy out the other or they may sell the business.
If they can work together, some people may want to continue operations as co-owners after their marriage ends. In this situation, they may want to create documents to define the terms of that co-ownership or plan for a buyout in the future.
Dividing a business during a divorce is a complex issue that requires careful consideration of legal, financial, and personal factors. With the right approach and legal support, it is possible to arrive at a solution that respects the contributions of both parties and paves the way for a stable future.
