What To Know About Dealing With A Business During A Divorce

Posted on: 25 September 2020

Divorces are already complicated as it is, but having a business can really complicate the situation. Here are some questions that you may have about going through a divorce and dividing a business. 

Know The Creation Date Matters

The laws in your state are going to vary, but know that the creation date of the business matters. If the business was something that you held before you were married, you may have the right to retain the entire business because it existed first. Some states will stay that the business is still a joint marital asset, and go about various calculations to figure out how to split things up. For example, you may be entitled to a greater portion of the business due to starting it before the marriage, and need to split up a portion based on the length of time of the marriage. 

Meanwhile, if the business was created after the marriage, it is more likely that you'll need to split up the business in a more fair way since it was likely created with joint marital assets from. 

Look At The Operating Agreement

Any LLC should have an operating agreement that defines how the business is run and who has control. This will help define the extent of the ownership as part of the business when multiple people are involved. For example, the operating agreement could define a person as owning a specific percentage of the business, which would protect the other owner from having their share split because of a divorce. An operating agreement can also help define perks received from the business, such as shares in the company. There may even be a dissolution clause for this exact situation where the terms are defined on how to break up an owner's share. 

Know How To Prevent Problems Early On

The best way to prevent problems with a small business when going through a divorce is to use a pre or postnuptial agreement. Since other people's employment can be disrupted due to a divorce, having an agreement in place can help prevent problems from happening that ruin the business. A postnuptial agreement can help show what assets went into creating the business, if those are joint or individual assets, and what percentage of a mature business would be owed to each spouse.

Work with a lawyer in your area if you plan on going through a divorce with a business involved. 

For more information, contact a divorce lawyer