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What happens to a business after divorce?

The process of divorce can be long and tedious as you sort through who owns what and how everything should be divided. If you and/or your spouse are business owners, you may have questions or concerns about dividing business assets. Business division will highly depend on when the business was formed and who owns it.

Is a business separate or marital property?

  • If you and your spouse started a business together, you both have rights to it. You have a few options for how you handle this situation, as long as you can both negotiate and come to an agreement about it.

You could choose to disband the business altogether. This decision may be hard to make since you have poured so much time, money and energy into your business, but it might be for the better.

Another option is to have one person leave the business and have the other spouse pay for their share in the company to gain full ownership of it.

Lastly, you could potentially continue to run the business jointly afterwards, strictly as business partners, but this can be very emotionally and mentally draining for people. Conflicts could easily continue and hurt the business in the future anyway, so think long and hard before deciding to choose this route.

  • If you started a business before marriage, you are officially the owner of your business but your spouse may still have rights to a share of the assets. Any increase in the company's value since you got married is marital property. If your spouse contributed to the business's value at all, such as investing in it or contributing labor, they may also deserve a share based on how much value they added.
  • If you started a business individually during marriage, the entire value of the company is marital property even though you are the sole owner. Your spouse may also deserve a particular share based on value they added through labor or investment in the business.

How are business assets divided?

Before moving forward with property division, you will want to have your business professionally valued so that you do not underestimate the worth of what you have. The portion of your business that is considered marital property, if any, will be examined in court and divided in a way that is considered fair to both parties. How property is divided varies highly from case to case so there is not one definitive split you can expect.

Property division can have a huge impact on your life after divorce, especially if a business is involved. It may be wise to seek the advice of a skilled family law attorney who can help to value your business and discuss your options for pursuing the best settlement.

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