How to Navigate Ownership of a Family Business During Divorce

 Posted on April 20, 2023 in Divorce

Getting a divorce can be challenging for anyone. Separating from your spouse will involve many different financial considerations, as well as practical concerns about living arrangements and ownership of property. These issues can become even more complicated if you are a business owner. When you, your spouse, or other parties have built a family business together, determining how to protect the business as you divide your marital assets can be difficult. By understanding your options and working with an attorney to negotiate agreements, you can find solutions that will protect your financial interests and allow for ongoing success after your divorce is complete.

What Happens if One Spouse Wants to Maintain Sole Ownership of a Business?

A spouse who has been the primary manager of a family business may wish to continue owning and operating the business after getting divorced. However, if the business was founded or acquired during the marriage, the other spouse will be entitled to a fair share of the business’s value. In these cases, it is important to have the business valuation performed by a professional who can provide an objective assessment of the business’s worth. Once the value is established, you and your spouse can work with your attorneys to negotiate a fair settlement that will allow one spouse to own the business, while the other spouse receives other marital assets of an equivalent value.

What Happens if Both Spouses Want to Maintain Control of the Business?

If you and your spouse have been closely involved in a family business that has provided income for both of you, neither of you may be willing to walk away and pursue other opportunities. In some cases, it may be possible to divide ownership and control of the business, with each spouse assuming a different role in the company while sharing decision-making responsibilities. If you and your spouse are unable to reach agreements that will allow you to co-own a family business, you may choose to sell the business and divide the profits earned as part of your divorce settlement.

What if a Spouse Owned a Business Before Getting Married?

If either you or your spouse started a business before your marriage, it will usually be considered to be separate property that will not need to be divided during your divorce. However, any increase in the value of the business during your marriage may need to be addressed, especially if one spouse contributed to a business owned by the other spouse. In these cases, the business owner may be required to reimburse the other spouse for the contributions that were made, such as by allocating a larger share of marital assets to that spouse in your divorce settlement.

Can a Prenuptial Agreement Protect a Family Business?

Business owners will often use prenuptial agreements to determine how ownership of a business will be handled in the event of divorce. For a family business founded during a marriage, a postnuptial agreement may be created to make decisions about ownership of business assets and issues related to property division should divorce enter the picture. If you have a prenuptial or postnuptial agreement in place, its terms will generally be followed as you address divorce-related issues.

Contact Our Farmington Hills Property Division Lawyers

Dividing ownership of a family business during divorce can be a complicated and stressful process. However, with the help of a skilled and experienced lawyer, you can ensure that you understand the value of business assets and other types of marital property, and you can determine your best options for dividing assets in a way that will protect your financial interests. If you have questions about these or other divorce-related issues, contact the Novi business asset division attorneys at Elkouri Heath, PLC by calling 248-344-9700 to schedule a free consultation.

Sources:

https://www.nfib.com/content/resources/legal/a-small-business-owners-guide-to-divorce/

https://www.forbes.com/sites/frawleypollock/2022/02/24/how-to-lessen-the-impact-of-divorce-on-your-business/

https://www.americanbar.org/groups/real_property_trust_estate/publications/probate-property-magazine/2019/march-april/three-options-a-private-business-a-divorce/