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What to know about dividing a business in a divorce

On Behalf of | Nov 24, 2023 | Divorce |

Owning a business can further complicate the already complex process of divorce. If you have invested significant time and energy into a commercial venture, you surely do not want to let it go easily.

However, a business can become marital property like any other asset. Understanding the principles of equitable distribution and discovering strategic measures may help you decide what to do.

Equitable division of a business

The divorce rate is decreasing around the nation, and Massachusetts has one of the lowest, according to information from the United States Census Bureau. However, recent statistics find that entrepreneurs have a higher divorce rate than other groups, hitting between 43 and 48%. This is likely because a business takes so much time and adds new complications to the union.

Massachusetts seeks to divide all assets in a divorce in a fair manner, including a business. “Fair” does not necessarily mean a 50/50 split. Rather, the court looks at all factors about each spouse.

Even if you started the business before the marriage, your spouse’s contribution to the company could give them a claim to at least a portion of the business or its assets. Also, if you commingled any of the business’s assets with your personal accounts, the company becomes marital property, and your spouse can typically assert a level of ownership.

The power of a postnuptial agreement

One of the better ways to divide a business or any asset is to agree as a couple on how to divide the company. The court prefers this option as well.

A postnuptial agreement can lay out who gets what in case of a breakup. The agreement should outline the value of the business, what each person contributed and what to do if other factors arise so that the arrangement remains fair.

Common ways to divide the business include:

  • Both continue to share the company as partners
  • One of you buys out the other for full ownership
  • Agree to sell the business and divide the proceeds

If you want to buy out your ex’s share or sell the business, an impartial valuation will be helpful. A qualified or accredited appraiser can do the job.

Communicate as much as is reasonable during the process and try to settle on an agreement to avoid any unwelcome surprises by the court. Diligent preparation might help you keep your business.