Things to Consider with Your Business in a Divorce
When a couple gets divorced, many things become uncertain regarding splitting each other’s valuable items. One of those items may be a business you have shared and now must divide. We’ve narrowed down three things that should be considered—if you could lose your business, what day-to-day operations will change, and if you may be financially unstable after divorce.
Will I Lose My Business After Divorce?
The short answer is yes, you could lose your business after a divorce, but the Court generally prefers to award property in such a way that a business remains intact and owned by the spouse who was primarily responsible for the business operations. If you started a company before you were married, but the other spouse contributed to the business during the marriage, it could be considered that they have rights to the growth. But, in general, a business that was started prior to parties getting married is presumed to be the nonmarital property of the spouse who started the company. This designation of being “non-marital” can also apply to money earned by the business and assets purchased by the company with business profits.
If you started your business during the marriage, then the business would be considered a marital asset that is subject to division by the Court. The Court must place a value on the business, which can depend on many factors. Once a value is determined, the Court can decide if there will be a “buyout” of the other spouse’s interest, via a cash payment or an award of other comparable property.
If absolutely no agreement could be reached on how to divide a business, the Court always has the option to order the business to be sold, but this is not as common as other methods implemented by the Courts in allocating business interests.
How Divorce Changes Business Day-to-Day Operations
Should parties agree to continue sharing a business after divorce, there will be some noticeable day-to-day operational changes. If you find yourself splitting a business with a former partner, you must establish roles and responsibilities for each party, the same as you would with any other third party. Operating Agreements, such as those that may govern partnerships or LLCs, are recommended. These agreements may depend on what portions of the company you were awarded after the divorce.
If continuing to share the business post-divorce becomes too difficult, a person can consider selling the business or their stake in the business. Hiring an attorney may be the best way to handle a situation in which you want out of the company you once shared with your spouse.
Am I at Risk of Financial Instability with My Divorce?
Divorces, in general, may cost you a bit of money. This depends on if you hire a lawyer, if you have children, and if you must split any other business or property. You may find yourself worrying about your life financially for several reasons. Losing your business, or having to pay your spouse for their interest in the same, can undoubtedly cause stress and concerns about trying to maintain your expenses and lifestyle. When combined with possible maintenance or child support obligations, and the division of marital debts, many find themselves overwhelmed with trying to determine what their life will look like after the divorce. But, an attorney experienced with complex divorce litigation can often help you determine what those financial prospects or challenges will be after the case is over. They can also steer you in the direction of other experts who can help.
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Strieker Law Firm can help you navigate the struggles and successes of a divorce. With one of our expertise areas in the divorce and property division, Kristen Strieker can guide clients to peaceful resolutions for both parties. She can help you before marriage with drafting a prenup agreement or help you settle once-shared property, child custody, business, or anything else after divorce. Visit the Strieker Law Firm’s website to learn how we can help you with your divorce.