Could Your Ex Get a Share of Your Business in the Divorce?

Division of personal assets can get sticky in a divorce. Tensions are frequently high, and emotions can play a big role in the difficult of this division. But when it comes to businesses, the sheer complexity of the assets can make dividing the business a messy process—especially if one spouse believe the business is purely their own. If you’ve put the work into building and growing the business yourself, you might not want to see it divided or shared with your ex. Will they be entitled to a portion of your business when you divorce? Keep reading to learn more.

Is It Marital Property?

The first thing you’ll need to establish when determining whether or not your business will be divided is if the business is considered marital property. Of course, proving this can be just as complicated as trying to equitably divide a business. If you founded the business prior to your marriage, you have a stronger case for claiming the business as an individual asset. However, if your spouse had an active role in the business or you comingled business accounts with marital property, they may have a right to at least a portion of the business.

So, if you started the business after you were married, your spouse made major contributions to the company, or you comingled business assets and funds with marital accounts, the business will likely be considered marital property. If the opposite is true—the business was founded prior to your marriage, your spouse did not contribute to it, and the business assets remained separate—then you have a strong claim to the entirety of your company in the divorce.

Legal Considerations

Additionally, a divorce court will consider the legal structure of your business when determining if and how it should be divided. Establishing your company as an LLC or partnership with other business partners may preclude any right your spouse may have to the company. Establishing your business under a protected business designation can protect your ownership in the business as well as your partners’. This can also help to establish the business as a separate entity and make it easier to keep business assets divided from marital assets.

Prenuptial and Postnuptial Agreements

Another important consideration in dividing your business is whether or not you had a prenuptial or postnuptial agreement that specified if and how your company would be divided. Individuals who own a business prior to marriage would be wise to include their company in a prenuptial agreement, as well as keeping the business clearly separate from any marital assets. If such an agreement exists, maintaining your business ownership through your divorce is highly likely.

If a Business Is Marital Property

So, what happens if your business is considered marital property, and it’s not protected by a prenuptial or postnuptial agreement? In these scenarios, the business will be divided equitably, just as any other marital assets would be.

For spouses who wish to retain the business, it’s possible to negotiate for this in exchange for other marital assets. If this kind of agreement can’t be reached, there are three common ways for handling a business in a divorce:

1. Buy-out – One spouse buys out the other spouse’s interest in the business.
2. Co-ownership – Both spouses continue to jointly own and operate the business.
3. Sell the business – Both spouses agree to sell the business to more easily divide the profits and assets.

Getting Help with Business Division

Dividing a business is significantly more complicated than dividing personal assets. It requires accurate valuation of the business and all associated assets and accounts, and careful negotiation to ensure your rights as an owner are protected. Our team at The Harr Law Firm is highly skilled and experienced in handling high-asset divorces and business asset division. We also have a team of forensic accountants capable of delving deeply into a business’s assets and accurately valuing a business.

If you’re concerned about losing your business in a divorce, contact us to schedule your consultation. We’ll discuss your options and represent you to ensure that your rights as a business owner are protected.