Protecting Your Family Business During Divorce
As a business owner, you have undoubtedly worked hard to build your company and the thought of losing it during divorce may be deeply alarming. You may be wondering whether you can protect your business in the event of divorce, keeping it under your control and as a source of income. Unfortunately, there is no single answer to this question. Many people, upon divorce, must split their company with a spouse, or sell it and divide the proceeds. It is also, however, possible for the owner to keep the company in exchange for other assets. Read on to learn more about the property division process in Florida and how it could affect your family business.
Is the Business Marital Property?
In Florida, divorcing couples must divide their assets according to the state’s equitable division standard, which means that all of a couple’s marital assets will need to be split up fairly. This does not, however, mean that they must be divided equally. Furthermore, the rule only applies to marital assets, which includes assets and debts acquired by either spouse during the marriage. Most businesses are considered marital property if they were started, even if only by one spouse, during the marriage. A business that was started by one of the parties before the marriage took place, on the other hand, could qualify as separate property, meaning that it would not be divisible upon divorce. Even in this case, however, a business could become a marital asset if:
- The company’s profits were commingled with a joint marital account;
- Marital funds were used on the business; or
- Profits from the business were used to contribute to the household.
If a business is deemed marital property by the court, it could end up needing to be divided upon divorce.
Options for Keeping Your Business
If a business is found to be separate property then it will remain in the sole possession of the person who started it. If, however, it is found to be marital property, couples could take one of a few different routes when it comes to future ownership, including:
- Selling the business and dividing the proceeds;
- Agreeing to co-own and operate the business together;
- Giving the other spouse a greater share of a different asset in exchange for complete ownership of the business; or
- Obtaining a business valuation of the company and buying out the other spouse’s share.
The last option often proves to be the most palatable to divorcing couples, who are typically wary of working together after the divorce is finalized, while one of the parties may have no wish to give up the company completely. Another way to keep a business safe in the event of divorce is to include it in a prenuptial agreement, labeling it as separate property, which ensures that it won’t qualify as a marital asset and be subject to division upon divorce.
Do You Need Help Keeping Your Family Business in the Family?
If you own a business and are concerned about its fate in the event of divorce and want to speak with a Clearwater divorce lawyer about your legal options, call Cairns Law at 727-683-1472 and set up an initial consultation today.