There’s more to dividing property in a divorce than simply cutting everything in half. For one thing, Indiana law calls for an “equitable” division, not a 50/50 split. For another, some types of property are much harder than others to divide.
If you own a small business, you’ll find dividing it in divorce can be very complicated.
Separate and marital property
When you divorce, you and your spouse must divide your marital property, not your separate property. Generally speaking, anything you owned before the marriage is separate property, and anything you acquired during the marriage is marital property. However, there are exceptions to both those categories.
So, if you owned your business before your marriage, it’s possible that it would be counted as your separate property, and therefore not subject to division in divorce. But the longer the marriage, the more your spouse may have acquired a property interest in the business.
For example, your spouse may have helped you run the business, brought new customers to your business or just supported you personally and financially while you developed the business. Over the years in your marriage, the differences blurred between your separate assets and those of your spouse.
What is your business worth?
Let’s say you and your spouse have negotiated and decided that your spouse owns 25% of the business. Now what?
You have three main options when dividing a business:
- You can sell the business and give 25% of the proceeds to your spouse.
- You can continue to run the business with your spouse getting 25% of the profits.
- You can buy out your spouse’s 25% share in the business.
Of course, if you choose this third option, you need to know the total value of your business. For this, you need valuation experts to assess the business and come up with a total value.
Once you have a dollar amount for how much you will need to buy out your spouse’s share, you may need to secure financing.
Experience matters
As we have seen in this blog post, this process can be complicated both in terms of family law and business transactions. It’s important to seek out guidance from professionals with experience in business and family law.
