How your divorce may affect the future of your small business

Many Americans who start their own business are intensely focused on making it a success. There is so much work and sacrifice in those first shaky years that the business owner may need to depend on the physical and financial help of his or her spouse. And, of course, some couples choose to start a business together from the very beginning.

When business is good and the marriage is healthy, owning a business with your spouse (or with an investment from your spouse) can be a dream. If the marriage is headed toward divorce, however, co-owning a business can become a nightmare.

Divorce for business owners is often tricky. What ultimately happens to the business will depend on factors that include:

  • How big of a role your spouse plays in the daily operations of the business
  • Whether or not your spouse has a financial investment
  • Whether or not marital assets were used to fund the business
  • Whether or not you have a prenuptial or postnuptial agreement in place with provisions that apply to the business
  • Whether there are additional business partners or co-owners other than your spouse
  • Whether one spouse’s role in the business is essential to its continued functioning (for service-based businesses)

If a prenuptial or post-nuptial agreement is in place, your spouse may still have a claim to some of the business. Business owners often forget that when separate business assets get comingled with marital assets, determining ownership can get pretty messy.

Depending on the factors we listed above, there may be several ways to handle the business in divorce. You can sell it and split the assets, buy out your spouse, sell your share to your spouse or dissolve the business entirely.

Before you make any major decisions, you need to assess your options. In order to understand how your business will be affected by your divorce, please discuss your case with an experienced family law attorney.

Source: Birmingham Business Journal, “How to protect your business in a divorce,” Patrick Yeatts, March 25, 2015

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