How Can I Protect My Family Business During My Divorce?

 Posted on April 05,2021 in Divorce

Ending your marriage through divorce will involve multiple types of financial considerations. Determining how to divide your marital assets can often be a complex process, and this is especially true if you are a business owner. A family business or professional practice may be one of your most valuable assets, and it may also be your primary source of income. Ensuring that you can continue to own and operate your business will likely be one of your most important goals during your divorce, so you will want to make sure you understand how to approach this issue.

Is a Family Business Considered Marital Property?

Before determining how ownership of business assets will be handled, you will need to understand whether your business or practice is considered marital property. In general, if the business was founded during your marriage, it will be considered a marital asset, but if you owned the business before getting married, it will be considered separate property. However, even if your business is not a marital asset, you may need to address any increase in value of the business during your marriage. If your spouse contributed to the business, such as by helping manage operations or by investing marital funds in the company, you may be required to reimburse your spouse for these contributions.

Asset Division and Business Interests

If your business is a marital asset, it will need to be considered during the division of marital property. In some cases, spouses choose to sell a family business during their divorce and divide the profits earned. However, this may not be an option for you, so you may need to make other arrangements as you determine how to divide this and other marital assets.

If you wish to maintain full ownership of your family business, you will need to “buy out” your spouse’s share of business interests. This means that you will be granted full ownership of the business, while your spouse will receive other marital assets of a similar value. To ensure that assets are divided fairly and equitably, you will want to perform a business valuation to gain a full understanding of the actual monetary value of your business.

If you do not have the means to purchase your spouse’s share of your business, or if both of you have been equally involved in managing the business, you may choose to continue operating the business as co-owners following your divorce. In these cases, you will want to make sure you have a partnership agreement that fully defines your roles and responsibilities, and you may want to include an option for one spouse to buy out the other spouse’s share of the business at a future date.

Contact Our Oakland County Business Asset Division Attorneys

The attorneys of Elkouri Heath, PLC can help you understand the best ways to handle a business or professional practice during your divorce. We can also help you create a prenuptial or postnuptial agreement that will allow you to make decisions about ownership of your business in the case of divorce or separation. Contact our Novi divorce lawyers at 248-344-9700 to set up a complimentary consultation.

Sources:

https://www.forbes.com/sites/catherineschnaubelt/2019/03/15/how-to-divide-the-family-business-in-a-divorce/?sh=5da8f3d842fe

https://www.inc.com/guides/2010/05/protecting-your-business-from-divorce.html