Dividing Business Assets When Going Through a Divorce

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When a marriage ends in divorce, the division of assets can be one of the most contentious steps. Moreover, when there is a business involved, it can be even more difficult to manage. Making sure everyone gets what they are owed is essential, but it’s also important not to destroy a business to ensure an even split.

It’s far more likely that a divorce settlement would find a way to keep the business intact while splitting other assets to make the division fair. This article will focus on how couples divide business assets in a divorce and what factors may affect this division. We’ll also touch on some other considerations for dividing marital property like pensions and property.

Businesses and Divorce

Businesses, like property and retirement accounts, are considered marital property in the eyes of divorce law. That means all of these assets can be divided up equally during a divorce settlement.

However, businesses are not always evenly divided when it comes to divorce settlements. There may be a number of other factors that could affect how you divide a business between ex-spouses.

If there are other directors to consider, this will impact how the assets can be divided.
A judge is unlikely to want to close up the business to split the assets. Instead, the couple should find a way to pass ownership of the business to one spouse and give the other spouse a larger share of the other assets to compensate.

How Do You Value a Business?

Valuing a business is difficult, and the courts will not place too much weight on any one valuation. They might instead seek multiple valuations to land on a fair amount.

The valuation will look at things like past and current trade, business assets, business property, and future contracts. It’s possible that the company value may have dipped as a result of the divorce, but a good judge will be able to see past this temporary decline to ensure both spouses get their share.

What Does “Marital Property” Mean?

During a divorce, all assets should be divided equally. Most define marital property as any property acquired during the marriage. This includes business investments between the two people and individual properties or gifts to either person during this time.

Divorce law typically divides marital property equally between both parties unless it’s not possible to split evenly. For example, if a couple owns two properties, but one is worth less than the other, they may be able to split the rest of the assets to make up for the difference in value. This will help them to avoid having to sell a sentimental property.

What Happens to a Pension After Divorce?

One of the first things to consider when divorcing is how to divide pensions. For example, if a business owner has a pension plan through their company, this would need to be divided alongside other marital property.

In most cases, both people can receive some funds from the pension. However, this needs to be decided as part of the financial settlement. It will be too late if left until couple reaches retirement age. Then, one spouse will have no claim over the other’s pension.

Final Thoughts

Divorcing spouses need to remember they must disclose all their assets when they have been separated for a while. It can be tempting to hide assets away, but this is unlikely to work. During the process, the business owner will have to declare the value of their business. If their partner disagrees with the valuation, this can drag out proceedings even more.

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