If you are an entrepreneur, you may have spent years and thousands of dollars to get your business up and running. It can be scary to think that a divorce could cause you to lose what you worked so hard to build.
Fortunately, in many cases, business owners can work out a deal to maintain their interest in their business.
Determining whether your business is separate property
In Michigan and other equitable distribution states, courts handling divorces will require that all marital property is divided between spouses fairly and equitably.
When it comes to a business, the court will first have to determine whether the business is marital property. If the court considers it to be separate property, it will likely not be subjected to equitable distribution during the divorce. In other words, your spouse will likely not get any part of the business.
When deciding whether the business is separate property, the court will consider:
- Start of business: If you started the business before getting married, it is more likely to be classified as separate property.
- Prenuptial or postnuptial agreement: If your agreement states that your business solely belongs to you in the event of divorce, the court is likely to follow the terms of the agreement.
- Spousal involvement: If your spouse was not involved in the company at all, your business is more likely separate property.
- Marital funds: If your business assets and funds were commingled with your marital assets and funds, your business will likely be considered marital property.
If the court determines that your business is marital property, it will be valued and subjected to property division. There are several options for dividing up the business. You can buy out your spouse’s interest in the business, continue to share ownership with your spouse, or sell the business and split the proceeds.
Your attorney will represent your interests throughout the divorce process. If maintaining ownership of your business is a priority for you, your attorney will do whatever they can to protect your rights.