As a business owner, you have invested time, money and passion into building your company. If you and your spouse decide to part ways, however, you might worry that your investment in your business is also at risk. What should business owners know about property division during divorce?
Is your business separate or marital property?
If you established your business before your marriage and maintained a clear separation between your household finances and your business, the court may consider you its sole owner. Your business may also be separate property if you have a prenuptial or postnuptial agreement in place that addresses that question.
However, in some cases, the court may consider your business marital property. This might be the case if you established your business during your marriage or if your spouse made contributions to the company’s operations. If your business is marital property, the court will divide it in a fair or “equitable” way alongside other property like your home and your vehicle.
What will happen to your business during property division?
While dividing your business can be a daunting task for many, you can still build a strategy based on your wishes and future goals. Depending on those goals, you might:
- Sacrifice other assets to maintain sole ownership of your business
- Sell the business and use your portion of the proceeds to fund future endeavors
- Move forward as co-owners after outlining each spouse’s role in decision-making and company operations
How much is your business worth?
No matter which method you pursue, it is essential to establish the value of your business. To do this, you might use the price for similar businesses that recently sold, your past or projected income or the value of your equipment, products and other investments.
Whether you want to keep the business you have built or create a strong foundation for future ventures, it can be important to work with appraisers, attorneys and other professionals when creating a legal strategy. Their guidance can help you focus on your priorities and protect your interests.