Divorce and Business Partnerships
To determine financial consequences, Virginia law enforces the equitable distribution of marital property and debts of spouses choosing to divorce. In regard to spouses who share a business, preparing the business’s financial information to present in court can be tedious. It is recommended that you obtain legal counsel to ensure financial decisions are not heavily impacted by emotions, which can run high during separation or divorce.
Classification of Marital vs. Separate Property
Marital property is jointly-owned property existing from the date of the marriage to the date of separation. Separate property is that which is acquired (1) before the marriage, or (2) during the marriage as an inheritance or a gift (not from your spouse). Lastly, and the classification that jointly-owned businesses fall into, is property that is part marital and part separate.
In order to determine the best course of action for a business owned by divorcing spouses, a divorce attorney should review the value of the business, the business structure, and the financial records of the business. To begin the process of valuation of a business, both parties can take full inventory of assets, liabilities, and income. These documents as well as an accountant’s opinion of the value of the business are excellent documents to bring with you in your initial consultation with an attorney. The options for a business co-owned or operated by two divorcing people include the following:
- One spouse keeps the business and “buys out” the other spouse
- Continue to co-own the business
- Selling the business and splitting the proceeds
These options are not usually straight-forward solutions. Legal considerations or adjustments must be made if the business has other owners/investors, or if the separated spouses cannot agree on important terms, such as a selling price.
Business Partnerships as Part of Domestic Law
It is important to receive professional advice from a divorce attorney and/or a financial adviser who is well-versed in this facet of domestic law. Business owners have a unique circumstance when faced with divorce, and securing knowledgeable legal counsel will help you decide which path makes the most sense for your situation.
