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How Does the Court Handle Dividing a Business During a Divorce?

Many people today own or are co-owners of businesses. If you are in the middle of a divorce, the fate of your business may be in limbo until the divorce is resolved. Fortunately, state law and established legal precedent may make it easier to determine what will happen to your company. Divorce normally doesn't mean that you have to give up your company. Generally, you will either buy out your spouse or otherwise provide compensation based on contributions made to the company. Depending on how the business is structured, it may be possible to walk away with full ownership and rights to future profits.

During a divorce, the court will determine your business' value, normally with the guidance of forensic accounting experts hired by one or both parties. Depending on the particularities of the business, the value may or may not include future earnings. There are several different methods that can be used to value a business. You should consult with your attorney and expert in order to determine the best method to use to value your business.

Once the value of your business is determined, the court will decide the most equitable way to divide the value of the business based on the circumstances of your case. If you are keeping the business, the court could order that you buy your spouse out of his or her marital share through the use of direct payment or by off-setting the value against other marital assets. The court could also, under certain circumstances, order that you and your spouse remain co-owners of the business in order to ensure you both receive your portion of the marital value. While it is possible that the court could order you to sell the business, this is an unlikely outcome, particularly when the business is your source of income. Courts are generally loathe to disrupt the lives of employees and others related to your business.

It is also possible for you to argue that the entire value of your business is your separate property and not subject to division during a divorce if you owned the business prior to marriage or inherited it from a family member. However, there are several factors that are to be taken into account in deciding what portion of the value of the business is marital and what portion may be separate.

If you own a business and are going through a divorce, it is important to hire a knowledgeable attorney who can explain how the court may treat your business based on the particular circumstances of your case.

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Wolinetz & Horvath

Wolinetz & Horvath
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