In a divorce, mutual property acquired during the marriage is considered marital property, and each spouse is entitled to half of the said property. This is straightforward for most items like cars, houses, and furniture. But what about a family business? These can be particularly hard to address unless each party understands its rights and options.
Family businesses are generally treated like any other asset in a divorce. That is, if it was acquired during the marriage, it is considered marital property, and the assets of the business will need to be separated like any other property. If the business was owned by one party before the marriage, it could remain non-marital property provided, however, any increase in the value of the business may be considered marital property.
It is common for both parties to want the business to continue operating after the divorce proceedings, especially if the business is the sole source of income for one or both spouses. For the business to continue, the spouses must address the ownership of the business and decide upon one of three possible options:
Sale of the Business
This is the most straightforward. The spouses may agree to sell the business to a 3rd party and then split up the profits that they made in the sale.
The spouse who was primarily responsible for the operation of the business may maintain sole ownership. It may mean paying one-half of the marital value to the other spouse or giving up other assets of equal value in order to keep the business solely in your name.
If both spouses equally share the responsibility of the business, and they are on good enough terms that they can continue to work together, then continued co-ownership is also a possibility. There must be obvious lines made regarding the shares and responsibilities granted to each party, and both spouses must be made aware of the option of buying the other out of the business sometime in the future.
Usually, a judge will not order future co-ownership if the case is contested. However, if the parties agree to co-ownership, the judge will usually approve the agreement.
During a divorce, a family business can be a little more complicated than your average marital asset. It can seem difficult to separate the business from the family members who operate it. But with a little bit of concentration and planning, your family business can continue to thrive even after your divorce.
With the help of a professional and understanding attorney like those found at Garretson & Holcomb, the process can be easy and pleasant. If you’re in the West Chester, Mason, or Hamilton area, call (513) 863-6600 to speak to us today.