Business Ownership and Dissolution in a Divorce
In a divorce, assets need to be split up between the spouses. This is typically a contentious issue, with the parties arguing over houses, cars, money, and other property of value.
Kentucky is an equitable distribution state, which means property is divided equitably .
Dividing assets can be tricky when it comes to businesses. Whether you and your spouse own a business together or you own a business by yourself, it may need to be split in a divorce.
But there are a couple of things you need to consider. First, you need to establish the valuation of the ownership interest in the practice or business entity. This is challenging to do and may require the assistance of a business valuation expert. The value of a business can be calculated as if it were sold by a willing seller to a buyer. An “earnings multiplier” may also be used. This involves multiplying the annual income, sales receipts, or gross receipts by a certain number to determine the value.
Next, you would need to determine what percentage of that ownership interest can be considered a marital. If the business was started or acquired during the marriage, it will may be characterized as marital property. If the business began or was acquired prior to the marriage, it may be considered non-marital property with potential to have a marital component.
If a business is considered separate property, a spouse may be entitled to the appreciation or growth in the value of that business that occurred during the marriage. This is especially true if marital funds were invested into the company during the marriage.
Protecting Your Business in Divorce
The best thing you can do to protect your business is to think ahead. With the right preparation, you can avoid drama and hold onto your business.
The best thing you can do is get a prenuptial agreement. A prenuptial agreement is an effective way to protect your business. It is a binding contract created before marriage that outlines what will happen to all assets in the event of divorce or death. You and your spouse get to decide what will happen rather than letting the courts decide. This makes the process of splitting assets easy and inexpensive. However, there must be full disclosure about assets, and each spouse should have an attorney represent them during the process.
If you are already married, it is not too late. You can get a postnuptial agreement, which is pretty much the same as a prenup, except it is executed after the couple has gotten married.
Contact Us Today
Your business is likely one of your biggest assets. Take the steps to protect it now before you consider divorce.
The Kentucky divorce lawyers at Velez Law, PLLC, can help you protect what matters to you. Contact us today to learn more about your legal options. Fill out the online form or click below link to schedule a consultation.
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