Commingled assets happen when you mix business and personal finances, like using company funds for personal costs or personal money to pay business bills. While this may have been the best decision when starting a new business or during financial emergencies, it can cause problems in a divorce.
It might make it difficult to determine true business value
Commingling funds can make it hard to split business income from personal funds or know which costs are for the business. Company property might include personal items. Business debts and personal loans might mix. These problems make it hard for accountants and business valuators to assess the business’s income, costs, property and debts, which can lead to an inaccurate valuation of the business.
For example, there may be a potential for under- or overvaluation of the business. If one pays personal expenses using business income, it can make the business look less profitable, leading to a lower value. But if a person uses personal funds or properties for the business, it can make the business look more valuable than it is. These can make it hard for the court to figure out how much the business is really worth.
It can affect the separation of marital and separate property
Michigan follows equitable distribution. This means courts try to divide marital property based on each spouse’s economic situation, what they did for the marriage and future needs. When personal and business finances are mixed, it becomes unclear which assets are part of the business and which belong to the marriage.
This can make it hard to determine how much of the business’s growth is due to the owner’s efforts (separate property) versus contributions from the marriage (marital property). As a result, commingling can potentially turn what was once separate property into marital property.
Get the guidance you need
Divorce can be complicated, especially when it involves business assets. Don’t let past financial decisions affect what you have worked so hard to build. Seek the legal counsel you need for your unique situation.
