When most people get divorced, their performance at work may temporarily suffer due to stress and distraction, but their job remains secure. If you own a small business, however, a divorce could potentially end your marriage and ruin your livelihood. The good news is that you can likely protect and maintain your business through the divorce. But doing so takes careful planning and, usually, the help of an experienced attorney.
Does your spouse have an ownership stake in the business?
Ohio is an equitable distribution state, meaning that marital assets must generally be divided equitably (which is not always the same as equally).
In most cases, assets acquired during the marriage or increasing in value during the marriage are generally considered marital assets and subject to division. Even if your spouse had no role in day-to-day operations of the business, chances are good that you are commingling business income and personal income. Other considerations include:
- Was the business founded prior to marriage?
- What was the source of funding used to acquire or found the business?
- What were your spouse’s personal or financial contributions to the business?
Unless you’ve been extremely careful to keep it a separate asset, your spouse likely has an ownership stake in the business and would be entitled to their fair share of it in the divorce.
What are your options?
You essentially have three options for what to do with your business in divorce. They include:
- Buying out your spouse’s share of the business, either with a cash buyout or by trading away other marital assets of equal financial value
- Selling the business and splitting the proceeds
- Continuing to run the business and remaining a co-owner with your spouse (even if your spouse doesn’t have a management or hands-on role)
Obviously, the third option is the most difficult for many divorcing couples, but it can be done if both spouses are on board.
Focus on proper valuation and professional guidance
Placing value on a business is often more difficult than it may seem. It requires a careful analysis of all aspects of the business, including nebulous assets like “good will.” But with the help of an attorney and/or other financial and business professionals, it can be done. It will also be necessary to determine what your spouse’s share of the business is, because it may not be a 50-50 split.
Going through a divorce is difficult and stressful, particularly when you are also worried about the business you worked hard to build. For these and other reasons, hiring the right professionals to guide you through this process is a wise investment in your future.