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Divorcing when one’s marital estate includes a business

People may acquire numerous resources during their marriages. Spouses may combine their incomes and savings accounts so that they can purchase a home together. They may finance vehicles, buy furniture and set money aside for retirement.

Any of those assets could lead to disputes between spouses during divorce negotiations. Assets that represent more financial investment, resources that impact future financial stability and possessions that have emotional value can quickly become a source of conflict during divorce negotiations.

If either spouse runs a small business or professional practice, it could easily fall into all three of those categories. What can people expect when they plan to divorce and their marital estate includes a business?

Employment arrangements may need to change

It is common for small businesses to use the skills and services of the immediate family members of the owner. Having a spouse work as an administrative assistant or provide cleaning services is relatively common. Spouses may need to quickly negotiate arrangements for the spouse without an ownership interest in the business to develop their career elsewhere.

Business holdings may be vulnerable

The ownership interest in the business might theoretically belong to one spouse on paper. However, their holdings may technically be marital property. If someone used marital income or assets to start the business or develop it, then at least a portion of the company’s value is marital property. Its value can influence the division of other assets even if the owner retains their interest in the company. Many business owners and professionals prioritize negotiating property division settlements when they divorce in the hopes of protecting the business from the risk of dissolution or division.

Owners need to watch out for duplicate claims

There are several ways in which a business holding can complicate property division proceedings. It can be very difficult to properly determine what the company is worth and equally challenging to find other assets worth an equivalent amount.

Additionally, the non-owner spouse may have unrealistic expectations regarding what they want to receive from the divorce. It is quite common to integrate future business income into the company valuation. However, the non-owner spouse might then also use that future income as a reason to request spousal support or alimony. The spouse who owns and operates the business could end up overpaying support or making too many concessions during property division negotiations as a result.

Those with high-value resources, including businesses, often need help when preparing for an upcoming divorce. Preparing for predictable challenges can help streamline divorce proceedings for those with high-value and complex assets.