If you own a business and it looks like you and your spouse will be divorcing, you may be worried about the ownership of the business. After all, this is something that you have built up, and it is both financially important and emotionally important to you. Will your spouse be entitled to half of it if you divorce, or is it protected?
There are various factors to consider to determine whether a business will be included as an asset.
Was the Business Started Before the Marriage?
If your business was started or you bought into it before the marriage took place, it may be considered as a separate entity and not included in the divorce proceedings. However, this will also depend on whether the business has become more profitable over time. The business profits may be considered from when the marriage started.
The money that has been used to help finance the business will also be considered. For example, you may have "borrowed" money from the personal accounts due to cash flow in the business accounts, and this will affect how a business is divided. It's important to keep all business and personal finances separate.
When the Business Is a Family Inheritance
If you can prove the business was a gift and not purchased by you, there are chances that it will be kept out of the divorce as an asset. But you will need to provide proof that it was a gift.
The courts will also look at the other people benefiting from the business and whether other members of the family have controlling interests. Any money invested into the business will also need to be considered.
Are You In a Community Property State?
The state you are in will also determine whether your business is given to your spouse, either in whole or part. California and Louisiana are both Community Property states, which say that anything that is gained within the marriage will be split between the two spouses.
Every situation is going to be different, as every business is unique. It may be a family-owned business passed down through the generations or you may have other business partners to consider. It also all depends on the state you live in and when the business was started. It will not be a straight-forward yes or no answer when it comes to divorce. This is why having a good divorce lawyer is so important to make sure everything is considered in full.
For more information, talk with a divorce attorney in your area, such as those at Eschbacher Law.