Entrepreneurs Navigating Divorce: Tips for an Effective Divorce Process

Dividing marital assets can be challenging in any divorce case. But if you are a business owner, you may be concerned about what percentage of the business your spouse might lay claim to. 

Entrepreneurs navigating divorce need experienced legal counsel to advocate for their rights. Here is what you need to know through this process. 

Is Your Business a Marital Asset? 

Pennsylvania law distinguishes between marital and separate property in a divorce. Marital property includes any assets and debts acquired during the marriage. The court would seek to divide these assets using an equitable distribution policy. 

Your business may be considered a marital asset if you launched it during the marriage. Even if you started it before the marriage, its increase in valuation during the time you were married may be considered a marital asset. 

If you have a prenuptial agreement stating that your business is your property alone, you may not need to be concerned. Otherwise, it will likely be subject to at least partial division. 

Protecting Your Business With No Prenup in Place 

Your attorney will help you strategize ways to protect your business in the absence of a prenuptial agreement. You may consider options such as:

• Structured buy-outs, in which you buy out your spouse’s interest in the business. This would allow you to retain ownership of the business while compensating your spouse for their share of the business value.
• Trading assets, or allowing your spouse to keep assets like retirement accounts or home equity in exchange for you keeping the business  

Business Valuation and Tax Implications 

You will need to understand the value of your business when navigating a divorce as an entrepreneur. Several valuation methods are common for this purpose. You might calculate the value of the business’s tangible and intangible assets, estimate its ability to generate earnings or cash flow in the future, or compare it to other, similar companies in the industry that have been sold recently. 

For your divorce, you will need to trace the revenue you received from the business and separate it from personal assets. This can help you avoid commingling your business with other marital assets and potentially losing more of its value in the divorce than you otherwise would. 

Also, consider the potential capital gains or other tax consequences you might face from dividing business interests. Working with forensic accountants and tax professionals can help you approach this process strategically. 

Planning for the Long-Term Potential of Your Business

Courts often consider future earning potential when determining the division of assets in a divorce. If your business is in a position to grow significantly in future years, the court may factor this into its valuation. 

Your attorney can help you address growth projections fairly and accurately during divorce proceedings. 

Seek Legal Counsel for Your Divorce 

Going through a divorce as an entrepreneur can be complicated, especially if you have multiple businesses. Our attorneys at Karen Ann Ulmer, P.C., can advocate for your rights during this process. 

Contact us today at (866) 349-4117 for a confidential consultation.