A divorce can bring significant changes to many parts of your life, including your business. If you own a business in Michigan, understanding how a divorce could affect it is crucial. Taking steps to protect your business can help you navigate the process and minimize disruptions.
Dividing marital assets
Michigan is an “equitable distribution” state, which means the court divides marital assets in a fair, but not necessarily equal, way. If you started or grew your business during your marriage, the court may consider it a marital asset. This means your spouse could be entitled to a share of the business, depending on how much value it gained during the marriage and other financial contributions from both spouses.
Determining the value of the business
To divide assets fairly, the court must determine the value of your business. A professional appraiser may assess its worth, taking into account factors like revenue, profits, and future earning potential. If your spouse contributed to the business, either financially or by helping with day-to-day operations, it could increase the value they are entitled to receive. Understanding your business’s value can help you prepare for negotiations during the divorce.
Options for keeping the business
If you want to keep full control of the business, you may need to buy out your spouse’s share. This could involve giving up other assets, such as a portion of retirement funds or the family home, to balance the division. Alternatively, you might negotiate a settlement that allows you to maintain ownership while compensating your spouse over time.
Impact on daily operations
Divorce can also affect your business’s daily operations. The stress of a divorce might impact your ability to focus on running the business effectively. Additionally, if your spouse plays an active role in the business, changes in management could disrupt operations. Preparing for these challenges by delegating tasks or seeking additional support can help keep the business stable.
Protecting your business in the future
To minimize the impact of a future divorce, consider creating a prenuptial or postnuptial agreement that outlines what will happen to the business if your marriage ends. This type of agreement can provide clarity and prevent disputes over ownership.
Understanding how the division process works and taking steps to protect your business can help you navigate this challenging time. Preparing early and being proactive can help keep your business on track during and after the divorce.
