Business owners must tread carefully when it comes to the division of assets during divorce. It is very likely that some or all the business assets qualify as marital property. As such, the business could be subject to division.
When does a business or business interest qualify as marital property? Generally, state law considers businesses that begin during the marriage as marital property.
It is important to note that business owners who enter a marriage with the business already established are still at risk. In these situations, the appreciation of the business during the marriage is likely subject to division during the divorce process.
What do I need to know about dealing with a business interest during divorce? It is important to address these two issues in the event the court considers the business or the appreciation of the business a marital asset:
- Value of the business. One of the more difficult parts of the process involves the valuation of the business. The business can be valued by an asset, market or income approach. Each approach involves a review of the business' financial statements.
- Considerations if support payments are part of negotiations. It is important to take into account any business shares if one spouse is requesting spousal support payments. In some cases, courts will deem the grant of shares in the business along with spousal support payments inequitable.
Couples going through divorce will use this information to guide property division negotiations. The business owner can use other marital assets to replace the value of the business during these negotiations and retain full ownership of the business when the divorce is complete.
Navigating these negotiations can be a complex and arduous process. As noted in a recent piece in Wealth Management, this asset is often the most significant asset during property division negotiations. An attorney experienced in these matters can review your business assets and help guide you through the process in a manner that is more likely to preserve your business interests.