Dividing assets during a divorce is never easy, especially when a business is involved. Things can get complicated due to the high stakes involved, and it helps to understand the key factors at play and protect your interest.
The first step in dividing a business is determining whether it is marital or separate property. It can be both, depending on when it was established and how it has evolved during the marriage. This can present a challenge during the property division process.
For instance, a business created before the marriage may be considered separate property. However, if the other spouse contributed to its growth or success during the marriage, a portion of the business could be classified as marital property and subject to division. Similarly, if marital assets were used for business purposes, each spouse may be entitled to a share of the business.
Valuing the business
The next challenge lies in accurately valuing the business. This includes factoring in its reputation, customer loyalty and potential for future earnings. Disagreements about the value of the business are commonplace and can be a significant source of contention during the divorce process.
Options for dividing the business
Once the valuation hurdle is behind you, you will also have to decide how to divide the business. Should you buy out your spouse to retain control or sell the business and split the proceeds? Can you run it together as co-owners?
If you or your spouse owns a business, individually or jointly, seeking legal assistance to understand how it will be treated during a divorce is crucial. With the proper guidance, you can more easily navigate such complexities, ensure your rights are protected and reach a fair resolution of your divorce.