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What will happen to your business during divorce?

On Behalf of | Oct 16, 2023 | Divorce

When you found a business, your company is more than just a financial investment. Your business reflects your hard work and passion. As a result, the fate of your business could be one of the most stressful decisions you make during the divorce process. What should you know about how divorce could impact your business?

Does your spouse have a claim on your business?

One of the first questions you should address when approaching the divorce process is whether your business is marital property or nonmarital property. If your business is marital property, you will divide it with your other possessions during divorce.

However, if your business is nonmarital property – for example, if you designated it as separate property in a prenuptial or postnuptial agreement – you are its sole owner. While its value might factor in the division of other property, your company will likely stay in your possession.  However, please be advised that it does not mean that your business will not be impacted by the divorce.

What will happen if your business is marital property?

If the court determines that your business is marital property, you can still take steps to protect it from the impact of your divorce. Pennsylvania courts divide property based upon equitable distribution principles.,

Here are three potential options when dividing your business, however the parties can always reach a different, hybrid approach:

  • Selling the business – Selling a business and dividing the money you receive can provide you and your spouse with funds as you embark on the next chapter of your life. However, this approach also means giving up your business and going through the stressful task of finding a buyer.
  • Buying out your spouse’s share of the company – If you want to move forward as the sole owner of your company, you may give up a portion of your savings or other assets in exchange for your spouse’s stake in the company.
  • Moving forward as joint owners – If you and your spouse can put the business first, you may be able to run the company together after divorce. However, this can be financially and emotionally complex, and you should clearly outline each spouse’s responsibilities.

Business owners concerned about the challenges they may face during divorce should seek experienced guidance either before the marriage occurs, before formation of the business, or immediately if a divorce is imminent. An attorney with experience in both business law and family law can provide unique insights and create a strategy that supports your future goals.