Business owners know that a wide variety of factors can impact their business. A shift in the market can bring new success or strain your finances. The right employee can bring fresh ideas and new growth. Every new customer brings new opportunities.
Events in your personal life, though, can also bring changes to your business. This is especially true if your marriage ends in divorce. How will your divorce impact your business?
Is your business considered community property?
You may be the founder of your business and act as the primary guide for its growth. However, if you founded the business during your marriage and did not have a prenuptial agreement in place, the court may consider your spouse its joint owner. This is because the property you acquire during your marriage is considered jointly-owned in a divorce.
Even if you founded your business before the marriage, it could still become subject to division through a process called “commingling.” This can occur if you used funds from your joint account to support the business, for example.
What happens to businesses during property division?
If your business is marital property, it will be considered alongside your savings, your home and other marital property during property division. There are generally three different options available to business owners in divorce:
- Sell the business and split the proceeds
- Buy out your spouse’s share, either directly or by offering them another valuable asset in exchange
- Continue as co-owners, either as an ongoing arrangement or for a temporary holding period while you gather the funds to buy out your spouse’s share
If you wonder how you can protect your business from the impact of your divorce, you may want to discuss this issue with an experienced divorce attorney. With thoughtful legal strategy, you can protect your interests today and provide support your business goals in the future.