Are you getting divorced from your spouse, but you also own a small business? If so, you likely have questions about what will happen to the business, which is one of the most valuable assets from your marriage. Here are some common questions you'll have about this unique situation.
What If You Owned The Business Before The Marriage?
If you had your business before you were married, you may think that the business is free and clear of being a part of the divorce proceedings. However, it is important to realize that while you may have had that company before the marriage, it has likely appreciated after the marriage happened. This can lead to some of the value of the company becoming part of a divorce settlement, which can cause a lot of complications.
You will have to look at the valuation of the company at the time of the marriage and at the time of the divorce. For example, if the business was worth $1 million when you were married and it is now worth $1.5 million, that additional $500,000 in appreciation could potentially be part of a divorce settlement and subject to equitable distribution.
How Does Actively Managing A Business Alter A Divorce Settlement?
You may think that you were the one putting all the work into your business and that your spouse does not deserve to have part of the business during a divorce. That is why your ability to actively manage a business is factored into the settlement. Your spouse is likely contributing directly or indirectly towards allowing you to run that business. This could be in the form of staying home with the kids so that you can run your business or even acting as an employee and doing tasks for the business. This allows your spouse to receive part of the value of the business.
However, things can be different if you did not have to actively manage the business. For example, consider if you owned a rental property that belonged to a corporation that you owned before you were married. The rental property may not require you to actively manage it during the marriage while bringing in income that was distributed between you and your spouse. If the property is now worth more in value at the time of the divorce, that increase in value is not due to the active management of the property. Therefore, your spouse may not have a claim to the value of the property that your rental business owns.
Dealing with a business in a divorce can be tough, which is why it's best to reach out to a family lawyer for their assistance.
Share17 June 2020
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