Divorce outcomes are fact-driven. What will happen in your case depends on what is going on with your spouse, your business, and state law. We work with business owners to handle their unique situations fairly and protect their personal and business interests. There are “business owner gets divorced” horror stories, but your situation may be resolved so that the impact on your company is manageable (if not minimal) and you are able to start a new life.
Part of the divorce process is the equitable distribution of assets, including determining which should be divided. After that, the judge decides whether a spouse is entitled to an asset (like business ownership, or at least part of it) based on their discretion and applicable law. Most divorce cases are settled through negotiations. Your spouse may accept other assets and/or spousal support in exchange for not pursuing claims related to your company.
There are several factors in how your case may be resolved, including whether:
- You have an enforceable pre- or postnuptial agreement: Ideally, you both engaged with attorneys and worked out an agreement covering business ownership issues. If this is the case, the outcome may already be set. Time has passed, and with the benefit of hindsight, one or both of you may regret its terms. Unless both of you do not want to enforce the agreement and start all over again in the divorce process, how the issue will be handled has already been agreed upon.
- You have an unenforceable pre- or postnuptial agreement: There may be issues surrounding you or your spouse fully disclosing your business or financial situations and whether the agreement was voluntary. If your handwritten and mutually signed “contract” is not legally enforceable, it will not do you any good. Instead of contractual language, state law and its application to the facts will determine the outcome.
- You owned the business before your marriage, and your spouse has no ownership interest: Separate, personal property brought into the marriage is not subject to equitable division in divorce but any accrued value may be. If your spouse had their own business or was fully occupied with their career and played no role in helping you or your business, they are not in a good position to claim they should be awarded partial ownership or part of its increased value during the marriage. Their claim becomes stronger if they gave up a career or spent substantial time and energy supporting you and your business.
- You started the business during your marriage: If the two of you co-own the company, hopefully, you have terms in a postnuptial or ownership agreement with a buy-sell provision that covers divorce. If so, it should state that in case of a divorce, one buys out the other’s interest with the price determined fairly and neutrally. Without an agreement, and if only you own the business, it can come down to whether your spouse helped you and your business, and if so, to what degree. The more your spouse sacrificed their life and career, the better argument they have to be awarded part ownership and/or a share of its increased value during the marriage
The more organized, well-documented, and “by the book” you operate your business, the better off you will be in the divorce process. The more you run it by “the seat of your pants,” “under the table,” and engage in questionable practices to avoid taxes, the worse off you will be. You do not want to be in front of a judge insisting you are telling the truth if the evidence shows you are lying to the IRS. Credibility is critical if you cannot reach a settlement agreement with your spouse and your case goes to trial. Parties without credibility normally do not do well.
Get the Help You Need From an Attorney You Can Trust
The last thing you want is your marriage and your business to end at the same time. Whether you and/or your spouse own a business and want to learn more about how a divorce may impact you, call our office at (215) 608-1867 or book a consultation online. We can speak over the phone, via a teleconference, or meet in one of our offices in Doylestown or Langhorne.