Divorces with business assets are often more complex than standard separations. The division of marital property doesn’t just affect bank accounts or shared homes; it can impact divorce with business assets, influencing business operations, ownership rights, income, and shareholders.
Here is what you need to know to protect your interests when dividing a business in divorce.
Divorce with Business Assets: 3 Must-Know Facts
The first step is determining whether the business is marital property or separate property. The second and third steps involve business, income, and support obligations.
Separate property usually includes businesses started before the marriage or acquired by gift or inheritance. However, marital property can include businesses founded during the marriage or those that appreciated because of joint efforts or shared investments.
Even if one spouse is the sole owner, the other spouse may still have a legal interest in the business if they contributed to financial or operational growth. Determine equitable classification with a comprehensive review of financial records and business activities. Contact the Dornan Law Team for help.
Fact 1: Business Valuation Is Crucial
Businesses cannot be divided until they are professionally evaluated to determine their fair market value using metrics such as:
- Assets
- Liabilities
- Revenue
- Profit trends
- Industry comparisons
- Earning potential
- Intellectual property
Neutral, credentialed experts should conduct business valuations to avoid financial misrepresentation or fraud. Consult a criminal defense attorney if you suspect foul play.
Fact 2: There Are Multiple Approaches to Asset Division
Divorces with business assets require equitable division through three primary approaches. A buyout means one spouse retains the business and buys the other’s share at its appraised value. If a buyout is not financially feasible, proceeds may need to be divided equitably between parties by selling the business.
Another approach involves co-ownership, where divorcing spouses continue to own the business through mutual trust, well-defined contracts, and strong legal safeguards to prevent disputes. The best strategy depends on the business structure, financial resources, and each party’s willingness to remain professionally connected after divorce.
Fact 3: Business Income Is Actual Income
Business meetings are often used to calculate alimony and child support. However, business income may not be straightforward, as owners frequently pay themselves lower salaries to reinvest profits, which can complicate calculations.
Most courts consider the owner’s actual income, not their reported salary. Therefore, hidden revenue streams, personal expenses, and inconsistent distributions can affect support determinations. It’s not uncommon for one or both parties to undervalue business assets during divorce proceedings.
Forensic investigation may be warranted if there’s reason to suspect financial misconduct. Courts may issue financial penalties or adjust settlements in response. Consult a criminal defense attorney at the Dornan Law Team for more information on how to handle these situations.
The Role of Prenuptial Agreements in Divorce with Business Assets
A prenuptial agreement can reduce uncertainty and conflict during complex divorce proceedings, acting as a legal safeguard to define how business assets are handled when the marriage dissolves.
These legally-binding contracts establish whether a business is marital or separate property and can define how growth is treated to specify whether increases in value, reinvested earnings, or new branches remain separate or shared assets. Protect your business against disruption and streamline the divorce process with an ironclad agreement.
Dividing Business in Divorce: Dornan Makes It Easier
The Dornan Law Team knows how to accurately value businesses, uncover income, negotiate buyouts and settlements, enforce or challenge prenuptial agreements, and protect your interests without disrupting business operations. Reach out today to schedule a consultation.
