What Happens To My Business In A Divorce?
The word “half” can be dreaded by those who are going through a divorce. Half their income, half their property and maybe even half the time with the children. Along these lines, most spouses can start to think about the state of their business. Would that need to be halved? If it is half, how will that work out? How can you run a business that has been divided into half?
These are some of the many questions that can come to mind of those persons going through a divorce.
Is my spouse entitled to half my business even when it’s a family business?
Some businesses are often predating the marriage and is a family business. Typically in situations like this it can be difficult for the other spouse to be able to get half of that business since it was not made all by you in your marriage time. It predates your marriage and only the valuation of the time and effort and money you put into it will be halved and given to your spouse. However, if you have a percentage interest in the business that was created during the marriage, the other spouse may in fact have an interest in half of that business.
What happens in situations where I have a business partner?
In situations where you own a company with others, the situation can become a little complicated in terms of the valuation and the characterization of the interests involved. In such situations, it will be necessary to determine your interest in the business and thereafter what that interest is worth, likely with the involvement of a forensic accountant.
Factors that the courts take into account when making the decision
There are several factors that the family law courts consider before deciding on whether the business should be divided up into half or not.
- Does the business predate the marriage? How long before it was the business started?
- How profitable was the business pre marriage and what assets did it have?
- Has the value of the business increased or decreased under the spouse?
- Did the value of the business increase because of the efforts of the spouse during marriage, or only because of market conditions?
- How long have the couples been married?
These are only some of the many factors that need to be considered if you are going through a divorce and you own a business. It is advisable to seek legal advice in this situation to help you navigate through the process of dividing such a business.
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