Couples can accrue numerous high-value resources during marriage. Many spouses combine their credit scores and incomes to qualify for mortgages. They share expenses so that they can set funds aside for retirement.
The spouses may also start, purchase or invest in a small business. A family-owned business or professional practice can provide income and employment for both spouses. It can also be a valuable asset in its own right.
Those who own businesses may worry about the future of the organization if they intend to divorce. What typically happens to company assets in a divorce situation?
Community property rules may apply
Sometimes, the spouse who owns and runs the small business can protect it from a divorce. Perhaps they signed a prenuptial agreement with their spouse specifically because they had a successful business. In such cases, a business owner may be able to claim the company as separate property and exclude it from community property division proceedings.
The other main ways of establishing an asset as separate property include receiving it via inheritance or owning the asset prior to marriage. In both cases, commingling during the marriage is likely to muddy the waters.
Business owners inevitably reinvest marital assets and income into small businesses or professional practices. They may even ask their spouses to perform unpaid work for the business. In most situations, at least part of the organization’s value may factor into the property division process.
Owners can protect their interests
There are numerous tactics to help protect business equity during a divorce. Careful financial analysis and professional business valuation can help minimize how much value is at risk. They may also want to explore ways of settling property division matters outside of court.
Family law judges can be unpredictable when they apply community property statutes to complex, high-asset marital estates. A spouse hoping to retain sole ownership over the company and its assets may find that working to settle property division can help them achieve that goal by making reasonable compromises in other areas.
Having support can make a major difference for those anticipating complex property division matters in a high-asset divorce involving a business. Spouses who successfully protect their business holdings may have an easier time rebuilding after a divorce.