Divorce brings so much uncertainty to everyone involved. What will happen to the children? Who gets the house? Who gets the dog? And in some cases, what will happen to our business?
While determining the answers to each of these questions can be challenging and unique for each case, the fate of a business owned by one or both parties to a divorce can be especially complex.
Here are a few things business owners need to keep in mind if they are facing divorce.
Immediate Impacts Of Divorce On Business Owners
It is important to understand that a divorce can pull your attention away from the day-to-day operations of your business.
Court appearances, meetings with your attorney, supplying company documentation to your lawyer and your spouse’s lawyer, dealing with the concerns employees may have about the business’s future all create distractions and take time and focus.
In addition, a divorce in the making can have an immediate impact on your partner or partners in the business.
Should your business be subject to division in the divorce, your soon-to-be ex may be paid out with a share of the company, which could reduce your own partner’s share in the business.
Or your ex could sell his or her share of the company if there are no restrictions placed on what he or she can do with an ownership stake.
These questions can hang over the business’s daily operations, creating tension and stress for all – even before the legal work of the divorce has begun.
Determining Separate & Marital Property
Under Missouri law, a marriage is considered an equal partnership, with all assets – including profits/income from a business or an increase in a business’s value – presumed to be marital property if they were acquired during the marriage.
This means a divorce begins with the assumption that each spouse has an equal share in all marital property – including your business.
However, Missouri also views property as being either marital or separate. As mentioned above, marital property is obtained or developed during the marriage.
Non-marital property (also referred to as separate property) is any property owned by one spouse prior to the marriage. An increase in the value of non-marital property – including the value of a business owned by one spouse prior to the marriage – is also considered non-marital under Missouri law.
Interest or dividends from non-marital property though, is considered marital property.
How Business Assets Are Divided In Divorce
Under Missouri law, dividing the assets of a business can be extremely complex. These assets must be defined as non-marital or marital assets, with classifications determined by several factors.
The first factor considers the date of the marriage and the dates each spouse began working for, invested in or acquired an ownership stake in the business.
Next, Missouri courts look at how the business was funded and where that money came from.
The third factor is the amount of money the couple invested in the business.
The final – and often the most difficult factor to assess – is how much time, work, expertise provided and involvement each spouse put into the business.
After Property Classification Is Made, What Next?
Once the business or a portion of it has been determined to be marital property, the court must assess the value.
In cases involving small businesses, divorcing couples will often determine the value themselves and then divide it.
Courts often require larger businesses to be professionally assessed by a certified or accredited business appraiser to ensure accurate valuation. In some cases, each spouse will hire an appraiser and then submit the resulting appraisals to the court allowing the judge to make a final decision on the business’ value.
The court may then give the divorcing couple the option of selling the business and dividing the proceeds of the sale according to the percentage of the business determined to be a marital asset. Or the court may allow one spouse to buy out the other spouse’s share.
Of course, the couple may have a business partnership agreement that provides guidelines on the division of assets for the business or a prenuptial agreement that addresses the issue as well.
Business Owners Often Face A Complicated Divorce; Seek Knowledgeable Legal Counsel
Keep in mind the information above is a fundamental overview of an extremely complex subject – covering all of the potential issues associated with a business that is involved in a divorce would be essentially impossible since no two divorces (or businesses) are the same.
With so much at stake, working with a law firm that has extensive experience not only with divorce, but with divorce involving the ownership of a business is crucial.
Marler Law Partners has plenty of experience in all areas of divorce and has successfully represented numerous business owner clients.
If you’re facing a divorce – especially one involving a business – contact Marler Law Partners today for a complimentary consultation regarding your unique situation.