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What happens in divorce if you own a business together?

Divorce is always a complex matter, but the process can become even more complicated if you and your ex-spouse own a business together. There is no single course of action that will work for everyone who is a joint business owner during a divorce, but it is important to understand why the process can be so challenging.

Will I lose ownership of the business?

If you and your ex-spouse started a business together and you are both owners, you will have to decide what to do with your business next. There are generally three options you have:

· Shut the business down after splitting the interest

· Give ownership to one person in the divorce while the other collects their share of the interest and leaves the business (the owner usually pays the other for their share of the company)

· Both people continue to run the business together post-divorce.

It is possible for the two parties in a divorce to write their own agreement about how the business will be divided. However, this is often very challenging and not an option for a lot of people, because there is a significant amount of investment in a business from both sides that neither person wants to lose or undervalue.

How is interest in the business divided?

Generally, an expert in business valuation is needed, but many factors have to be considered when deciding each party’s interest. Interest in the business can be separate or marital, depending on whether the business was founded before or after marriage. This can affect which aspects of the business you have more interest in and what your overall contribution is.

Oftentimes, an expert will look at a financial history of the business in order to predict future profit and determine what the company’s value is. Each party’s contribution is an important factor too, including not only financial contribution but also contribution in labor, such as management of the business. The business’s current assets and liabilities might be examined as well.

Will the business be split 50/50?

While it is theoretically possible for a business to be split 50/50 between both parties, it is almost always more complicated than that, because there are a lot of factors that play into how the business is divided. It is also common in many cases for one party to attempt to hide or skew the true value of the business in order to gain a greater financial profit for themselves. It may also be possible to prove that a business is separate property rather than marital property, depending on your situation.

A skilled family law attorney with experience in high-asset divorces is crucial when business ownership is involved. These types of cases are almost never straightforward. It is easy for one party’s interest in a business to be undervalued in the complexity of the process. An attorney can carefully review your individual circumstance and help you through the entire separation process.

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