Why Divorce Can Be Bad For Business
Many people are not prepared for the equitable division of assets during a divorce. They are rarely prepared to come to terms with everything that is essentially up for grabs. One of the biggest surprises for many people is that their independently owned businesses may be treated as marital property and divided between them and their spouse accordingly. This can be disastrous for a business or partnership.
When is a Business Marital Property?
Generally speaking marital property includes any assets, debts, or property acquired during the course of the marriage. However, sometimes property or assets acquired before the marriage may fall into this category. For instance, if a business was started by one spouse prior to the marriage, it may still be treated as marital property if the value of the business substantially increased over the course of the marriage. Additionally, if there was any commingling of business and spousal funds, this can result in the business being classified as a marital asset. For instance, if funds from the family’s joint checking account are used to even temporarily cover a business expense, the funds will be considered to have commingled and the business may be treated as a marital asset, subject to equitable division. Likewise if your spouse contributed effort, services, or support to helping grow or operate your business, it may be treated as a marital asset. This is true even if you were not the sole owner of the business and had a partner.
How is a Business Divided Equitably in a Divorce?
The business can be divided in a number of ways. One popular way, if possible given the other marital assets, is for the spouse who owns the business to buy out the other party with cash or to trade them assets equal to their share, so that the original owner is able to retain full ownership. In other situations, the business may have to be liquidated in order to pay out both spouses. Other creative solutions, such as co-running the business are also welcome. If the spouses are able to reach a decision on how to divide the business and other assets on their own, with the help of lawyers, or through mediation, the court will enforce it.
How to Protect Your Business in a Divorce
The best way to avoid losing your business in a divorce is to have a prenuptial or postnuptial agreement in place that has clear terms stipulating how independently owned businesses by either spouse will be treated in the event of a divorce. If you have already proceeded with a divorce, it’s important to have dedicated legal representation to ensure that your interests are represented and to reach a resolution with regard to your business that allows it to remain in operation.
Contact Greater Orlando Family Law
If you have a business and are considering divorce, the experienced Orlando divorce attorneys at Greater Orlando Family Law will fight to make sure that you can keep what you have worked so hard to build. Contact Greater Orlando Family Law today to schedule a consultation.