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Writer's pictureAttorney Shannon Davis

When Your Business Needs a Divorce Attorney: Protecting Your Company During a Split

Divorce can be a challenging and emotionally charged experience, especially when a business is involved. For entrepreneurs and business owners, the dissolution of a marriage might not only affect their personal lives but also put their business at risk. In some cases, a company may even be added as a party to the divorce proceedings. Understanding why this happens and what to do if you find yourself in this situation is crucial for protecting your business and ensuring a fair division of assets.

Why a Business May Be Involved in a Divorce

  1. Business as Marital Property

    • In many cases, businesses established during the marriage or significantly grown during that time can be considered marital property. As such, the business may be subject to division alongside other marital assets.

    • Even if the business was started before the marriage, if marital funds were invested into it or if your spouse contributed to its operations, your spouse might be entitled to a share of the business's value.

  2. Spousal Claims on Business Interests

    • A spouse may assert an equitable interest in the business, especially if it was a significant source of income for the household or if they contributed to the business’s growth. They may seek a portion of the business’s value or profits.

    • This can apply even if the spouse wasn’t directly involved in the business’s daily operations, depending on their financial or indirect contributions.

  3. Valuation of the Business

    • To fairly divide a business during divorce, the court will often require a formal business valuation. This involves a detailed review of the company’s financial records, assets, and earnings to determine its current worth. Both parties may need to agree on a certified business appraiser to conduct the valuation.

  4. Adding the Business as a Party

    • In certain situations, the plaintiff spouse may request to add the business as a formal party to the divorce proceedings. This typically occurs if there are concerns about one spouse managing or hiding business assets or where the business constitutes a significant marital asset.

    • By adding the business as a party, the court gains direct jurisdiction over the company and can ensure transparency in how business assets are disclosed, managed, or divided during the divorce.

What Business Owners Should Do if Their Company Becomes Part of a Divorce

  1. Seek Legal Advice Early

    • If you anticipate divorce or are in the early stages, it’s critical to consult with both a family law attorney and a business attorney. These professionals can help you understand how your business may be affected by the divorce and explore strategies for protecting it.

  2. Keep Business and Personal Finances Separate

    • One of the most important steps you can take is to keep your business finances completely separate from your personal accounts. Avoid mixing funds, and ensure that your business expenses and personal expenses are independently managed.

  3. Consider a Prenuptial or Postnuptial Agreement

    • For business owners, a prenuptial or postnuptial agreement can be a valuable tool to protect your business in the event of a divorce. These agreements can outline what happens to the business and ensure that ownership remains intact.

  4. Prepare for a Business Valuation

    • If your business is classified as marital property, be prepared for a business valuation. Gather financial records and consult with a business appraiser to ensure an accurate and fair valuation is conducted.

  5. Negotiate a Buyout

    • If your spouse is entitled to a portion of the business, you may be able to negotiate a buyout. This could involve offering other marital assets, such as real estate or savings, in exchange for keeping sole ownership of the business.

  6. Maintain Stability in Business Operations

    • Divorce can be disruptive, but it’s important to maintain business as usual to avoid affecting the company’s performance or value. Reassure your partners, employees, and stakeholders that operations will remain stable despite personal changes.

Conclusion: Protecting Your Business in a Divorce

When a business is involved in a divorce, the stakes are high. Whether it’s ensuring an accurate valuation, negotiating a fair settlement, or protecting the business from being divided, it’s essential to approach the situation with a strategic mindset. The key is to plan early, keep your business and personal finances separate, and work with experienced professionals to safeguard the future of your company.

Shannon Davis Legal: Expertise in Business-Related Divorce Matters

At Shannon Davis Legal, we have the expertise to represent business owners whose companies are at risk in a divorce. Whether you need guidance on business valuations, negotiations, or protecting your company from potential claims, our team is ready to advocate for your interests and secure the best possible outcome for your business. Contact us today to learn how we can help you navigate this complex process with confidence and clarity.

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