What Will Happen to a Shared Business During Divorce?

What Will Happen to a Shared Business During Divorce?

Navigating the complexities of divorce can feel overwhelmingly daunting, particularly when your shared business is on the line. If you’re considering ending your marriage but are consumed by worries about the future of the business you’ve built together, you’re not alone. Many couples in your shoes grapple with tough questions: Will you have to part ways with the business? Will only one of you be able to stay involved? Can you continue co-owning it? These uncertainties can be paralyzing, making it hard to envision a clear path forward. At Iafrate & Salassa, P.C., we’ve helped countless business owners in Michigan emerge successfully from the divorce process and safeguard their business interests. In this post, we’ll discuss what typically happens to a shared business during divorce and suggest steps you can take to protect your investment and secure your future.

Michigan Law Regarding Division of Business Assets in Divorce

Michigan divorce law mandates that all marital assets and debts be divided equitably between the spouses. This means that a judge will determine a fair distribution of property and liabilities, taking into account factors such as each spouse’s contribution to acquiring the assets, their earning potential, and financial needs. When it comes to dividing business assets, courts typically follow a few different approaches:

• Buyout: One spouse can buy out the other’s interest in the business by paying them for their portion of its value.
• Co-ownership: Some couples are able to continue co-owning and running their business even after they’ve divorced. This is often more feasible when both spouses have a significant role in the company and can work together effectively.
• Sell and split: If neither spouse wants to or is able to continue running the business, they may agree to sell it and divide the proceeds between them.

It’s important to note that when determining the value of a shared business, all assets and debts must be considered. This includes tangible assets (such as equipment or inventory), intangible assets (such as intellectual property or brand reputation), and any outstanding debts or liabilities. Accurately valuing a business can be complex and requires the assistance of financial experts such as accountants or appraisers.

Steps for Protecting Your Business During Divorce

While the court ultimately has the final say in how a shared business is divided, there are steps you can take to protect your interests and increase the likelihood of a favorable outcome. These include:

• Pre-nuptial or post-nuptial agreements: Pre-nuptial agreements clearly outline each spouse’s rights and responsibilities regarding the business in case of divorce. For those already married, a post-nuptial agreement can achieve similar goals.
• Maintain accurate financial records: Keep detailed records of all business activities, including income, expenses, and assets. This will help ensure an accurate valuation during divorce proceedings. It’s also important to keep personal and business finances separate.
• Consider a buy-sell agreement: This type of agreement outlines what will happen to the business in case one spouse wants to leave or sell their share. It can be beneficial for businesses with multiple owners.
• Consult with an experienced divorce attorney: Divorce proceedings involving a shared business can be complex, so seeking guidance from a knowledgeable attorney with experience handling similar cases is crucial. They can inform you of your rights, advocate for what’s best for you, and provide valuable advice.

Let Iafrate & Salassa, P.C. Protect Your Business

Putting the future of your business on the line during divorce is terrifying. However, with the right approach and support, protecting your investment and securing your future is possible. By familiarizing yourself with Michigan divorce law and taking steps to safeguard your business, you can confidently navigate this difficult time and emerge successfully on the other side. If you’re considering divorce or have questions about how it may affect your business, don’t hesitate to reach out to our team at Iafrate & Salassa, P.C. We are dedicated to helping individuals through all aspects of divorce proceedings and will work to achieve the best possible outcome for you.