Getting divorced can get tricky for anyone, but when you’re a business owner or entrepreneur, it gets even more complicated. If you’re an entrepreneur, you’ve worked hard to get where you are and don’t want to give it all away. If you’re married to an entrepreneur, you’ve supported them through tough times, exciting times, and maybe even worked in the business. That’s why both parties in an entrepreneur’s divorce usually always want to know how the company will be divided and who is entitled to what.
Here are some common questions that arise when it comes to business owners and high net worth divorces.
How will the business assets be divided?
This can be done by both spouses coming to a mutual agreement or by a judge deciding who gets what. If you can agree with your spouse, that’s generally the best route to take. But, that’s not possible with all divorces. When a judge gets involved, they will take into consideration how long the business has been owned and whether both spouses have been active in the business.
Who has the final say about how assets will be divided?
Whether both parties come to an agreement or a judge gets involved, a judge will always have the final say.
Is it possible for the judge to grant the business solely to one spouse?
Yes, it is, but it’s more likely the business will be separated in some way. This is especially true if both spouses were active in it or if the business was owned for a long time during the marriage.
Can I buy my spouse out of the business?
Yes, but it won’t be cheap. The amount that is usually paid is more than just the cost of half of the business. This is because the business will continue to make money after the divorce. Since the marriage will be void, the spouse who is bought out won’t benefit from any future profits. That’s why they may receive half of what the business is valued plus what the spouse could have expected to have earned.
How can I protect my business from divorce losses?
While no one can anticipate a divorce when they start a business, taking some steps, in the beginning, can protect the business down the road. If one spouse is the primary owner and operator, and they can prove it, they may have more protection if a divorce should happen. Also, if there is only one name on all of the registration documents and contracts, there should be no doubt who the principal owner is. But, not many people do this because no one goes into a marriage expecting to divorce.
Can my spouse get half my business if it was passed down by my family?
Before any decision is made, there needs to be proof that the business was a gift. Ownership interest will also be looked at to determine whether the business is being passed down entirely to you or if it’s being split among other family members. The time and money everyone involved in the family business invested in it will also be looked at as well as whether they have any interest in the business.
Does my spouse get half of my business if it predates the marriage?
If you had your business before you got married, it will likely have a separate property part of it. This will depend on several factors, including how long you had the business before you got married. The value of the business at the time of the marriage and whether or not the value has changed either positively or negatively are among the factors that will be considered.
How does a business partner factor into what my spouse will receive from my business?
This can get tricky but doesn’t have to be. Usually, a business partner’s interest in the company can be separated from yours and any community portion that exists.
It’s essential to know the possibilities of what can and can’t happen when you have a business and are going through a divorce; being prepared and educated can make a world of difference. If you need help understanding your current situation with your business and divorce, feel free to contact me.
