Marriage is a time to celebrate the union of people who wish to spend the rest of their lives together. Nevertheless, when irreconcilable differences arise, divorce may be the only option. It is important for those directly involved in a divorce proceeding to be aware of not only the implications of divorce on their finances, property and children, but also the implication for one’s business interests.
It is not very often that businesses are sold because of a divorce, but for a business owner, a prenuptial agreement may be the best way to protect the business. When a prenuptial has been drafted properly and is fair and equitable, it can be difficult to overturn.
There are several permutations of how business ownership can be handled during a divorce proceeding. If a business was already in existence prior to the marriage, the owner will usually keep that business after the divorce. However, the business will be valued as of the date of marriage and any increase in value may be considered marital property. In most cases, the other spouse would be awarded assets of equal value in order to keep the business intact.
As a general rule, a business started together as a couple is treated as marital property. However, if one spouse was more involved in the business, that spouse may get the business while the other spouse would be awarded assets of equivalent value. A spouse who plays a very active role in a business that was owned by the other spouse owned prior to marriage is typically entitled to any increase in value from the start of the marriage until finalization of divorce.
In some cases, parties can create a post-nuptial agreement to decide what to do with the business and other assets in the event of a divorce. For business owners, it is important to consider the legal implications of separation and divorce on their businesses. A prenuptial agreement may not the first thing on one’s mind when planning a wedding but they offer a good way to protect one’s business interests.
Source: News Observer, “Ask the experts: Prepare for marriage, divorce so they don’t tear business apart,” Jessaca Gigilio, April 2, 2013