If you owned a business during your marriage or started a business during the marriage, that business could be subject to equal distribution during the divorce. Dividing closely held business assets can be complicated – especially if you owned the business prior to getting married. If joint funds were used to expand or support the business, it can become even more complicated.
Often business owners have questions regarding how the non-owner spouse will be compensated during the division of assets. If one spouse began contributing to the family business after the marriage started and contributed directly to the growth of the company, dividing the asset is not as straightforward.
To divide a business, it must be appraised and a value must be assessed for equal distribution. The valuation is done by a certified appraiser. That individual will find out the fair market value of the business and calculate the company’s assets minus any liabilities (debts). The total value will be established using one of multiple methods, including:
- Comparing the business’s value with similar businesses currently for sale.
- Reviewing industry standards to determine the value (such as comparing other retail stores).
- Combining methods to determine a good faith estimate.
How to Protect Your Business from Divorce
To keep a business intact and avoid having to sell and split the assets, there are things a business owner can do to protect their investment. These include:
- Creating Provisions in a Business Agreement That Exclude the Spouse – A business owner should already have a buy-sell agreement if there are partners included in their operation. This will state what will happen to the business if the owner’s status changes, pre-set price agreements for the sale, etc. The agreement can also limit the spouse’s involvement, which may offer a layer of protection.
- Always Keep Business Assets Separate from Family Assets – By separating business and family assets, a business owner can avoid a situation where one spouse may have a claim to some of the equity in the business.
- Do Not Involve the Spouse in the Business – Keep the spouse’s involvement in the business to a minimum. The more involvement they have in the day-to-day operations, the higher the claim they have to assets in the business.
- Trade the Share of Marital Assets for Business Equity – If the one spouse has a viable claim for business equity, the business owner could trade marital assets for business equity to avoid having to split the business.
- Sell Business Equity – While not ideal, a business owner can convince investors to buy shares of the company in order to pay off the non-owner spouse and maintain business functions.
Do You Need to Protect a Business from Divorce? Contact Romanowski Law Offices Today
During a divorce, you need a family law attorney that understands the complexities of business equity and marital assets. Romanowski Law Offices may be able to help you keep ownership of your business and avoid having to split it for a divorce. Call us for a case evaluation today at 732-603-8585 or fill out an online contact form with your questions.