Divorce is never easy, but there are definitely circumstances that make this already painful time even harder. If you own a business and you’re in the midst of a divorce, you’re likely losing sleep over what will happen to it. Before you start imagining the worst, learn more about how a business may be handled in a divorce. When you’re ready to get more personalized advice, call Haygood, Cleveland, Pierce, Thompson & Short at 334-560-1936.
Marital Property vs. Separate Property
First, you have to understand how Alabama handles marital property and separate property. Marital property is anything that was earned or acquired during the marriage, while separate property is property that one spouse brought into the marriage and kept separate. Exceptions include inheritances, which generally remain the property of the separate owner.
If you started your business before the marriage, that doesn’t necessarily mean it’s considered separate property. If money from the business was used to benefit the marriage, it may be commingled and therefore considered marital property. If your spouse contributed to the business or helped in its growth, they are likely entitled to some share of it.
Even if your business is considered marital property, that doesn’t automatically mean you lose half of it in the divorce. Alabama divides assets in an equitable way, not necessarily an equal way.
Protecting Your Business in Divorce
You may be wondering about your options if your business is, in fact, marital property. Prevention is always easier than a cure. If you can protect your business with a prenuptial or postnuptial agreement, that’s the best way to go. Of course, if you’re already married and considering divorce, that is likely not an option.
Negotiating to keep your business may be an option, too. Business owners often assume that their ex wants a share of the business, only to find out that their ex wants nothing to do with it. By negotiating your division of assets with your spouse ahead of time, you can protect your business.
Start thinking about where you’re willing to compromise—especially if you know your spouse is determined to get their “fair share” of your business. However, think about it: how many people really want to run a business with their ex-spouse? If you are willing to give them some of what they want, they may be more open to letting you keep your business.
If Your Business is Subject to Division
There are several ways this situation may play out if your business is going to be divided during the divorce. First, you may wish to sell the business and split the proceeds. This may be a viable option if the business isn’t as profitable as you’d expected or you’re ready to move on to a new venture.
Second, you may be able to buy out your ex-spouse’s share of the business. While this will mean giving up some of your assets during the divorce, it allows you to keep your business and have a clean break with your ex-partner.
The third option is often the least popular: running a business with your ex-partner. This might be an option if your divorce is generally amicable and you trust them as a business partner. If the trust is completely broken, though, this is likely a bad idea.
You may want to remain business partners if you both bring unique skills and insights to the business. In this situation, though, you may also want to draw up a contract that explicitly outlines both your obligations to the business and what rights you have to the business.
The best thing you can do at this point is talk to a divorce lawyer. The team at Haygood, Cleveland, Pierce, Thompson & Short has extensive experience with all types of divorces, and we can help you find the right solution for your needs.
Contact Haygood, Cleveland, Pierce, Thompson & Short for the Help You Need
Don’t go through your divorce alone, especially when there’s a team of committed divorce attorneys ready to support you along the way. Call Haygood, Cleveland, Pierce, Thompson & Short at 949-541-9944 or send us a message via our to schedule a consultation now.