March 22, 2024

Divorce is always stressful, emotional, and overwhelming, but when you own a business, you may have additional concerns about protecting the future of your business as you go through the process. In many divorces, determining if and how the business will be divided can be a serious point of contention. If you are going through the divorce process as a business owner, you need an attorney with experience in high-asset divorces where dividing a family owned business has been a factor.

Marital Property v. Separate Property

In Ohio, marital assets are separated in a divorce by the principle of equitable distribution. In some cases, this may mean that assets are divided equally, but the court can make any division it feels is equitable. In the case of a family-owned business, you will need to determine if the business will be categorized as a marital asset or separate property. In general, Ohio considers marital property to be anything that was acquired during the marriage, with very few exceptions. If the business was founded during the marriage, it will likely be considered marital property, even if one spouse was minimally involved in the business. In certain cases, even if a business was formed before the marriage, the increase in value that occurred during the marriage can be considered marital property. When you are initiating the divorce process, it is important to speak with your divorce attorney about the specifics of your business and how it will be considered during the divorce.

Business Valuation During the Divorce Process

For most assets, assigning a value is as easy as providing financial documents or having an appraiser determine the value of a home or a car. Businesses are not as easy to value. When you are going through a divorce as a business owner, your divorce lawyer will have you work with a business valuation expert. There are several ways a business can be valued, including comparing your business to similar businesses that have sold in recent years, or looking at profit and loss statements to evaluate net worth. Your attorney and appraiser will negotiate with your spouse’s attorney and appraiser to agree upon the final value of a martial business before it can be divided.

How Will the Business Be Divided?

There are several options to divide a business that is considered marital property. The first is to sell the business and split the profits. As the profits will be considered marital property, they can go through the process of equitable division just like any other asset. While this option is the most straightforward, most business owners do not like the thought of the loss of their business due to divorce. Another option is for one spouse to relinquish their ownership claim in exchange for another asset or a buy-out equal to one-half of the agreed upon value. In some cases, one spouse may keep the business, while the other spouse retains the real estate. In other cases, all other assets will be divided equitably, and one spouse will pay the other half the value of the business in order to obtain sole ownership. Finally, in the case of amicable divorces, the spouses can continue to co-own the business as separate individuals, with a thorough and clear agreement about each other’s share of ownership and responsibilities to the business. While this can keep the business intact and functioning as always, it is often not possible in many divorces.

How Owning a Business Will Impact Spousal Support

Spousal support is not always automatic, but is a major concern for many divorcing spouses, particularly in high-asset divorces. Spousal support is often awarded by the court to allow both spouses to maintain a similar standard of living as they were accustomed to during the marriage. This is based on how long the marriage lasted, the needs of both spouses, and the earning potential of each spouse. If you are the primary owner of the business, or maintain ownership after the divorce, you may be required to pay spousal support to your former spouse based on the value of the business, even if the salary you take from your business is lower than expected. If your business structure is changed due to or as a result of the divorce, it can affect the spousal support amount. The court will consider both spouse’s contributions to the business when evaluating if spousal support is indicated, and if so, the amount of support. Your divorce lawyer should work alongside a financial advisor or tax professional to help you determine the best way to move forward and maintain the health of your business.

Business ownership often goes alongside a high-asset divorce, as a family owned business is a significant asset that will need to be addressed during the asset distribution process during a divorce. Many business owners are, justifiably, worried about how their divorce will impact the health of their business and their stability moving forward. When you own a business and are going through a divorce, it is important to work with a divorce attorney who has experience with both high-asset divorces and divorces involving family businesses. This experience will be invaluable during the process and can help protect your financial future. If you are filing for divorce or going through a divorce and need experienced legal representation, I can help. Please contact my office today.