What Happens To The Family Business During A Divorce

Divorce is a complicated process. Add a family business to the mix, and the situation becomes even more problematic. The storm of emotions can be traumatic, not just for the couple but for the children as well.

A divorce does not have to be messy. Despite the emotional roller coaster that it brings, you can choose to divorce peacefully. A divorce attorney or a family law attorney can help you if you want to take your divorce outside of court.

Separation of Properties

Each state has a set of laws when it comes to dividing the properties of the divorcing couple. The assets will be divided into marital and non-marital properties. Marital properties refer to assets that the couple earned during the time that they were married. In some states, such as California, these properties are referred to as community property.

Non-marital properties, on the other hand, are properties that meet the following conditions:

  • Properties owned by either spouse before they were married
  • Gifts and inheritance received by either spouse during the marriage
  • Properties that were agreed to be exclusive in an agreement, such as a pre-nuptial agreement

The division of marital properties can vary state by state. In Colorado, marital properties are not automatically divided equally between the spouses. The courts will decide how the division of marital properties will be done based on what the judge thinks is fair. The following factors can affect the judge’s decision:

  • The individual contributions that the husband and wife have made to the marriage, both monetary and non-monetary
  • The market value of each marital property
  • The earning capacity of each spouse during and after divorce
  • The financial status of each spouse
  • Child custody and care after divorce
  • Appreciation of non-marital properties during the marriage

Division of Family-owned Businesses

During a divorce, businesses are also treated just like any other property. The value of the business will be assessed, both present and future. However, the valuation process is tricky in some states where there are no valuation guidelines in place. The value of your business will largely depend on the evaluator.

A divorce attorney can help you protect your assets or what is rightfully yours. Collaborative law or mediation can help you resolve the division of your properties outside of the court.

You have three options on how to divide your family business: buy the shares or interests of your spouse (or sell your shares to your spouse), sell the business, or keep the business as it is.

Alternative Dispute Resolution or Collaborative Family Law

Divorce is inevitable in some marriages. However, what is avoidable is a difficult and stressful litigation process. Many couples choose alternative dispute resolution or collaborative law to settle their differences. Collaborative family law focuses on forgiveness and the growth of each spouse.

The couple will agree to cooperate in the process, be honest, and give full disclosure of the information needed for the mediation process. The couple will be required to sign a collaborative agreement to ensure their commitment to stay true to the goal of collaboration: to work for what is best for their family.

It is also often less expensive than going to court. Your issues are resolved amicably. Also, you do not leave the decisions to a judge who does not know anything about your life. Your concerns or fears regarding your business will be heard and considered. Through peaceful negotiations, you can both agree to a division that is acceptable and satisfying for you. Whatever you have agreed on will be documented by your family law attorney and then legally finalized and approved.

How to Know if Collaborative Family Law Is for You

family

Here are some signs that collaborative family law is the best option for you and your spouse.

  • You both do not want to let go of the business, and you will be seeing each other soon. Or you want a fair agreement where both of you get what you truly need or desire.
  • You have the same circle of friends.
  • You will co-parent your children, and you want to protect them from all the negativity that a court proceeding can bring.
  • You want to keep the connection and friendship with each other’s family.
  • You want the possibility of friendship with your spouse in the future.
  • You want to have control over the decisions that can significantly affect your life, such as the division of the assets that you have worked so hard to get.

Although collaborative family law is recommended for most couples, it is not for everyone. Victims of domestic abuse and violence are not candidates for alternative dispute resolution.

Scroll to Top