Owning a Business and Anticipating a Divorce: What to Expect for Your Business
If you own a business in Maryland or the District of Columbia and are facing divorce, it is essential to understand how your business may be impacted and what steps you can take to protect your interests. Here is what you need to know about what can happen to your business in your divorce in Maryland or the District of Columbia.
Marital Property vs. Separate Property:
In Maryland and the District of Columbia, marital property typically includes assets acquired by either spouse during the marriage, including businesses started or acquired during the marriage, regardless of whose name is on the company. Separate property, on the other hand, includes assets owned by one spouse before the marriage or acquired by gift or inheritance during the marriage.
Valuation of the Business:
The first step in determining the division of a business in divorce is assessing its value. Business valuation can be complex and will likely require a business valuation expert. Factors considered in valuation may include the business's assets, income, liabilities, market trends, future earning potential, and personal goodwill.
Equitable Distribution:
Maryland and the District of Columbia follow the principle of equitable distribution, which means that marital property is divided fairly but not necessarily equally between spouses. When dividing the value of a business in divorce, the court will consider various factors, including each spouse's contributions to the business, their financial needs and resources, the duration of the marriage, and any agreements or arrangements made between the spouses.
Options for Division:
There are several ways the value of a business can be divided in a divorce:
Buyout: One spouse may buy out the other spouse's share of the business through a lump-sum payment or structured payments over time.
Co-ownership: Spouses may choose to continue co-owning and operating a business together post-divorce, although this option can be challenging and may require clear agreements and communication.
Sale: The business may be sold, and the proceeds may be equitably divided between spouses.
Offset: The value of the business may be offset by other marital assets allocated to the other spouse.
There are more options to consider for the disposition of a business in a settlement context than in litigation.
Protecting Your Business:
If you own a business and are concerned about its fate in divorce, there are steps you can take to protect your interests:
Obtain a prenuptial or postnuptial agreement that outlines how the business will be treated in the event of a divorce.
Maintain financial records and documentation related to the business, including income, expenses, and assets.
Consider mediation or collaborative divorce processes to negotiate a mutually acceptable resolution regarding the business division.
Consult with a qualified family law attorney who has experience handling complex asset division cases involving businesses.
Conclusion
Divorce can be a complicated and emotionally draining process, especially when it involves the division of a business. By understanding your jurisdiction’s laws regarding marital property division, seeking professional guidance, and taking proactive steps to protect your business interests, you can navigate the divorce process with greater confidence and clarity regarding the future of your business.
