If you are a business owner facing a divorce, you may be wondering what will happen to your business, including whether you’ll have to sell it, share it with your ex-spouse, or otherwise. Unfortunately, determining what happens with a business during a divorce isn’t always a straightforward matter. Read on and speak with the Pennsylvania family lawyers at Berman Voss to learn more about how divorce with a business can work.
How do courts determine who keeps a business?
In Pennsylvania, the law follows the principle of equitable distribution, which means that all marital property will be divided in a fair and reasonable way, not necessarily 50/50. Marital property includes any property that was acquired during the marriage or with marital funds, regardless of whose name is on the title. Separate property includes any property that was owned before the marriage, inherited, or gifted to one spouse only, unless it was commingled with marital property.
A business can be either marital or separate property, depending on the circumstances. If you started the business before the marriage, it may be considered separate property, unless you used marital assets to support it, or your spouse contributed to its growth or operation. If you started the business during the marriage, it is likely to be considered marital property, even if you were the sole owner or operator.
What is the process of dividing a business in a divorce?
To determine how to divide a business in a divorce, the first step is to establish its value. This can be done by hiring a business valuation expert, who will use various methods to calculate the worth of the business, based on its income, assets, liabilities, and other factors.
Once the value of the business is established, there are several options for dividing it. One option is to sell the business and split the proceeds according to an agreed-upon percentage or formula. Another option is to buy out your spouse’s share of the business by paying them a lump sum or installments over time. In some cases, you can continue co-owning and co-operating the business with your ex-spouse, as long as you can still maintain a professional relationship.
The best option for you will depend largely on the circumstances of your case. For example, many business owners feel as though they want to keep their business because it is their passion, livelihood, or legacy. Keeping a business up and running will also avoid disrupting employees, customers, or partners, making doing so a solid option. That said, keeping a business running in the face of a divorce isn’t always an easy task, so you’ll need to thoroughly consider all options with a competent attorney.
If you have further questions or are going through a divorce with a business, contact Berman Voss today.