What Will Happen to My Business in Divorce?
When two spouses get divorced, who ends up with ownership over a privately owned business will depend on a number of factors. The division of assets can be one of the most complicated aspects of dissolving a marriage, especially when it comes to the distribution of business property that one spouse worked incredibly hard to build. With over 25 combined years of exclusive family law experience, our team of attorneys can help you understand the factors that may impact the court’s decision in your case. You can rely on our lawyers to work hard to preserve your business interests and advocate on your behalf.
Distributing Business Assets in a Divorce
Massachusetts is an equitable distribution state, which means that the court divides all of a couple’s assets – including one or more businesses – fairly but not necessarily equally. Therefore, all assets are subject to division unless otherwise specified in a prenuptial or postnuptial agreement. This means that regardless of whether you acquired or started a business before getting married, any assets and debts related thereto would still be subject to division during divorce.
If divorcing spouses can agree on how they want to divide their business interests, they can present that agreement to the judge for final review and approval without the need for costly, drawn-out litigation. In cases where divorcing spouses have a marital agreement in place that one person is contesting, the judge will likely review the provisions of this contract to ensure that it remains enforceable and reasonably equitable to both parties, but if the prenuptial agreement was written well, the contract should hold up in court.
If there is not a prenup or postnup that exists to outline what will happen to a business when a couple divorces and the two parties are unable to reach an agreement, the court has final say in the matter. Sometimes, this leads to costly discovery as each spouse attempts to value the business or property. In some cases, estranged spouses may remain co-owners of their company regardless of their marital status and part of the divorce is creating a new partnership agreement as ownership moves forward without the marriage keeping the couple together. Another option may be for one party to acquire the other’s holdings in the company in exchange for a cash payment, which is referred to as a “buy out of the interest.” Our team can work hard to help you protect your assets and offer ways to pursue a favorable outcome.
Valuation of Business Assets and Debts
Regardless of whether a couple reaches a resolution for the distribution of business assets in or out of court, an expert valuator generally assesses the value of each party’s stake in the company. The financial expert may consider numerous aspects to reach a comprehensive appraisal, like whether the business is closely held, the industry or industries it operates in, its annual financial reports, cash flow, and the value of other companies in the same industry with a similar corporate structure. The details of your situation will determine which methodology the evaluator will use to reach their final assessment.
Additional Circumstances that Could Impact the Court’s Decision
Upon reviewing the evidence and documentation presented by both parties, including any valuation from financial experts, the court will look at some additional factors to determine the most equitable outcome for a divorcing couple’s business. The extent of each party’s involvement in the daily operations of the business, as well as either spouse’s role in growing the company’s earnings and assets could have a significant impact on the court’s decision. The court may also assess the contribution of either party to the business’s outstanding debt, in addition to both spouses’ incomes, assets, needs, and future employment prospects. Even if one party had nothing to do with running the business itself, if the other spouse was the primary caretaker for the children, that is a factor the court can look at in determining whether and to what extent the other spouse will have an interest in the business.
Speak with an Attorney if You Are a Business Owner Facing Divorce
If you are concerned about what will happen to your business in divorce, the first thing to do is speak with a lawyer. An attorney from O’Connor Family Law can advocate for your rights and help you pursue an equitable division of your business assets. For more information about how we could help you with your case, call today.