Divorce is an extremely stressful process, from child custody to division of assets. Many spouses who own businesses may wonder what will happen to their business after divorce. Like other assets, a business will likely be divided between the two spouses.
To determine how a business is divided, you must look at the division of assets as a whole. When dividing assets, you will sort them into three categories: his, hers and theirs. You determine which assets fall into which categories by determining which assets were brought into the marriage and which were attained during the marriage.
When dividing a business, you must first determine the category into which the business falls. If the business was started during the marriage it will likely be in the “theirs” or marital category. This will happen regardless of whether the business is in both names or in just one of the spouses’ names. In this case, an expert will look at many factors to determine what the value is for divorce purposes. This individual will look at the gross income, assets, accounts receivable and marketability to determine the true value of the business.
If the business is marital property, one of the following will occur:
- One party buys the other one out
- The business is sold and the net proceeds are split
- The parties continue to own the business together
If the business was started prior to the marriage by one spouse, the expert valuator will then have to determine the value of the business at the date of marriage and the value at the date of the petition of dissolution of marriage. The appreciated value is then considered marital. The value at the time of marriage is given to the spouse who started the business.
This is a fairly simplistic way to look at dividing business assets during divorce. It is important to note that each divorce and asset division process is different. To ensure you receive a fair amount, hire a skilled divorce attorney like those at Men’s Legal Center. The asset division process, especially for something as important as a business, can be extremely complicated and, if not handled properly, can leave one spouse with an unfair settlement. To ensure your rights are fully protected, have a divorce attorney from the Men’s Legal Center by your side from filing to the conclusion of the divorce.