Divorce can be a challenging journey, and if you or your spouse owns a business, it can add another layer of complexity. A business often represents years of hard work, and figuring out how it fits into a divorce settlement is crucial. In this guide, we’ll break down what happens when your business is considered marital property and what steps you can take to protect your interests.
What Is Marital Property?
In a divorce, marital property includes all the assets acquired during the marriage. Depending on the laws in your state or country, this could include a business if it was started or significantly grew during the marriage. Even if you owned the business before marriage, its increased value during the marriage may be considered marital property.
Steps to Take When Your Business Is Marital Property
- Understand Business Valuation
- A business valuation determines how much the business is worth. A professional appraiser or forensic accountant may evaluate your business using factors like income, assets, debts, and future growth potential.
- Determine Ownership
- Who owns the business? If you started or ran the business jointly with your spouse, they may have a claim to a portion of its value. Even if you were the sole owner, your spouse could argue their contribution (e.g., financial investment or unpaid support at home) added to the business’s success.
- Explore Settlement Options
- Buyout: One spouse keeps the business and buys out the other’s share.
- Co-Ownership: You and your ex-spouse continue managing the business together (though this can be emotionally challenging).
- Sell the Business: You sell the business and split the proceeds.
- Trading Assets: Instead of dividing the business, one spouse may keep it in exchange for other marital assets like the family home or retirement accounts.
- Consult Professionals
- Hire a divorce attorney, a forensic accountant, and possibly a financial planner. These experts can guide you through legal and financial challenges, ensuring you get a fair settlement.
- Consider Tax Implications
- Divorce can trigger tax consequences, especially when transferring or selling business shares. A tax advisor can help minimize liabilities.
Resources to Help You Navigate Business Division
Here are some helpful resources to make this process easier:
Websites & Guides
- Nolo: Divorce and Business Ownership
Offers practical legal guides for small business owners. - IRS: Divorce or Separation and Taxes
Essential tax information related to divorce and property division. - DivorceNet
A comprehensive resource for divorce laws and financial planning.
Podcasts
- “Divorce and Your Business” – Divorce & Beyond Podcast
Discusses real-life cases of business owners navigating divorce.
Listen here - “HerMoney Podcast” by Jean Chatzky
Offers financial advice for women, including business owners during divorce.
Listen here
Books
- The Entrepreneur’s Guide to Divorce by Carol R. Hughes
A guide for business owners handling divorce and property division. - Divorce & Taxes Made Simple by Attorney Patricia Butler
Focused on financial and tax planning during divorce.
Magazines
- Forbes – “Divorce and Your Business” Series
Tips and insights for entrepreneurs during divorce.
Visit Forbes Divorce Section
Affiliate Recommendations
- Rocket Lawyer (Affiliate Link)
Affordable legal document templates, including divorce agreements. - FreshBooks Accounting Software (Affiliate Link)
Manage your business finances during and after divorce. - LegalZoom (Affiliate Link)
Offers affordable legal assistance for business-related divorce matters.
