Experience. Results. Compassion.

How business ownership can impact your divorce

On Behalf of | Jan 18, 2024 | Divorce

Choosing to end your marriage can present a lot of emotional and financial challenges. This is especially true if you are going through a high asset divorce. Most business owners who are considering or already proceeding into a divorce will have a myriad of questions and concerns regarding how this could potentially affect the future ownership of what they have worked so hard to build over the years.

Colorado is an equitable distribution state, so the court divides all marital property in a manner it deems most fair. This can result in a high degree of variance from case to case compared to community property states where there is an equal division of marital property between the spouses. Therefore, doing all possible due diligence and taking advantage of resources readily available to you can prove even more critical to the ultimate outcome of your divorce.

What type of property is your business?

The primary factor in determining if your business could be subject to property division is whether it qualifies as separate property, marital property or some combination of the two. Separate property includes anything you or your spouse owned before your marriage. It is typically not eligible for division.

On the other hand, marital property includes anything acquired by you and your spouse during your marriage. This type of property is subject to division. Whether you started your business before or during your marriage, and the amount of involvement — or lack thereof — your spouse had in relation to your business, will allow the court to determine if it qualifies as separate or marital property.

The importance of an accurate business valuation

How much the court deems your business is worth can impact other areas of your divorce beyond just the division of assets. It can drastically affect both child support and spousal maintenance calculations. With different means of valuating a business from which to choose, and with a sometimes overwhelming task of creating a detailed list of all your business’ assets, acquiring the services of a financial professional or a business appraiser could help ease this process.

Protecting your best interests

There are means of ensuring your business doesn’t become part of the division of assets during your divorce proceedings. Both prenuptial and postnuptial agreements can keep your business assets from qualifying as marital property. Furthermore, shareholder agreements and buy-sell agreements have the potential to protect certain assets in the event of a divorce. With so much at stake and so many complexities involved, having the right support and assistance during this time can help eliminate potential mistakes and ease your transition toward the future.