Dividing business assets after a divorce can be a complicated process, both legally and emotionally. Business assets can hold significant financial and sentimental value, and dividing them often requires balancing legal, financial, and emotional considerations. It’s important to understand how business assets are divided in divorce, the factors courts consider, and the steps spouses can take to protect their interests.
Are Business Assets Marital Property?
The first step in dividing business assets is determining whether the business, and assets, qualify as marital or separate property. In most states, including Oklahoma, marital property includes assets acquired during the marriage. If the business was started or significantly expanded during the marriage, it is likely to be considered marital property, even if only one spouse is listed as the owner.
If the business was started before the marriage, it may be considered separate property. However, any increase in value or contribution from the other spouse during the marriage could subject part of the business to division.
Factors Courts Consider When Dividing Business Assets
When dividing business assets in a divorce, courts look at several factors:
Type of Business: Is it a sole proprietorship, partnership, corporation, or LLC? The structure affects ownership rights and the ease of division.
Business Valuation: Courts usually require a professional valuation to determine the fair market value of the business. Valuation considers assets, liabilities, income, and future earning potential.
Each Spouse’s Contribution: Courts examine whether both spouses contributed to the business, either directly (e.g., running operations) or indirectly (e.g., supporting the household to allow the other spouse to work).
Future Viability: Courts consider whether dividing or selling the business would harm its viability, especially if it provides income for one or both spouses.
Custody: In cases involving children, the court may factor in the primary custodian’s financial need when dividing business assets.
Courts consider how the business was funded, managed, and supported during the marriage to determine the best outcome.
Methods for Dividing Business Assets
Courts and couples use several methods to divide business assets, depending on the circumstances:
Buyout: One spouse can buy out the other’s share of the business. This is common when one spouse wants to retain sole ownership and continue operating the business.
Co-Ownership: In some cases, both spouses may agree to continue co-owning the business after divorce. This option requires strong communication and mutual trust.
Selling the Business: The couple sells the business and divides the proceeds. This option is useful when neither spouse can afford a buyout or when continued co-ownership is impractical.
Offsetting Assets: One spouse retains the business, and the other receives other marital assets of equal value, such as real estate, retirement accounts, or investments.
When deciding how you wish to divide assets, it’s important to think not only about your personal desires, but the impact each option could have on the business itself.
Protecting Your Business During Divorce
If you own a business, taking proactive steps can help protect your interests during a divorce:
Prenuptial or Postnuptial Agreements: These agreements can specify what will happen to the business in the event of a divorce, which can reduce disputes and uncertainty.
Keep Business Finances Separate: Avoid commingling personal and business finances, as this can make it harder to argue that the business is separate property.
Maintain Accurate Records: Keep detailed financial and operational records to support your claims about the business’s value and contributions.
If you’re going through a divorce, you should work with divorce attorneys, business valuators, and financial advisors to ensure an accurate valuation and fair division of the business.
Tulsa Divorce Attorneys You Can Count On
Dividing business assets during a divorce is a complex process requiring careful legal and financial planning. Courts strive for equitable distribution, considering the contributions of both spouses and the value of the business. By understanding the factors involved and seeking professional guidance, you can protect your interests and ensure a fair resolution. Whether you’re a business owner or a spouse with a stake in the business, our team can help. Contact us today at Tulsa Divorce Attorneys & Associates by calling 539-302-0303 or contact us online.