What Happens To Your Business In Divorce?
Written by Michelle N. Ogborne

What Happens To Your Business In Divorce?

Some people have two or even three families. You have your home family, your work family, and maybe a church family as well. If you own a small- to medium-size business, your family members can include partners, shareholders, and employees. When the right precautions aren’t in place, you can jeopardize your business in a divorce.

Options for Your Family Business in Divorce

You have choices, and if you share the same values, you can weather the storm of divorce with dignity and respect. You can also do what’s best for you, your partner, and the people who depend on you. Your options include:

1. Buy your spouse’s half of the company; sell your half

From a legal and financial standpoint, your business is simply another asset. It has debts, taxes, property, equipment… all the same things as your marriage. For each of you to get a fair share, you must divide it. You will hire a business appraiser to determine your company’s value.

Your “payoff” to your spouse may be arranged in one lump sum or in monthly payments. You may arrange to trade other assets that are equal in value to your spouse’s half. You may also be the spouse that is willing to sell your half of the business, and the same options apply. In either case, you may want a non-competition agreement.

2. Dissolve the marriage; continue business co-ownership

Co-ownership won’t work if you can’t maintain a friendly relationship with your ex. If you think you and your ex can manage your company together, that may be the best option. You both can keep your individual interests in the company. “Another benefit,” says Forbes, “Is that there’s no need for a valuation of the business, which can be an exceptionally expensive process.”

3. Sell the company

You will hire a business appraiser and determine an appropriate selling price. The good news is, you can use your revenue from the sale of your company to start another company. The bad news is, if it doesn’t sell immediately, you’re forced to continue working with your ex longer than you’d like.

When the Business in Divorce is Your Business

Even if you founded and managed your company with no spousal involvement, it may still be considered a marital asset. This alone is one of the best reasons for a pre- or post-nuptial agreement. Your first step is to determine if your business is indeed a separate asset.

You may have business partners. The best-case divorce scenario is that you have a marital agreement specifying your business ownership terms and also a contract with your business partner(s).

Your next step is to determine how much of your organization you own. For example, if you own half, then your half may be a marital or separate asset. If it’s a separate asset, your partners and employees shouldn’t be impacted.

If you started your company after your marriage and without a post-nuptial agreement with your spouse, your divorce may get tricky. Your organization is an asset and also a source of income. This may impact your financial business in a divorce.

Many financial factors can impact divorce when you own a business. For example, in Arizona, if the Court determines you will pay spousal support, the number of years you’ve been married will be a consideration.

When Your Business is a Liability in a Divorce

Again, your ownership of the business as a separate or marital asset/liability must be determined. You will want your divorce documents to spell-out your ex’s role in current and future debts and liabilities. In a perfect world, you’ll have an Arizona attorney that specializes in business law and divorce.

Arizona’s Business and Collaborative Divorce Attorney

Ogborne Law, PLC specializes in several types of legal and mediation services. We can help you protect your business before your marriage, during marriage, and even during divorce. Michelle Ogborne specializes in Arizona collaborative divorce, a family-first approach to divorce. Contact Ogborne Law if you have questions about marital responsibilities regarding your business in a divorce.