Your Challenges Are Our Top Priority

The challenges of addressing small business ownership during divorce

On Behalf of | May 7, 2024 | Divorce

A small business may represent someone’s family heritage or years of personal investment. Some people take over the family business when their parents retire or die. Other people go to school to obtain a degree and then begin a professional practice.

Small business ownership can offer a host of personal and financial benefits. A business can be a source of income that also allows an owner the flexibility to plan their own schedule and choose their own clients. However, that business can also be a source of risk and conflict. Someone without outside employment may not have any guarantee of income during an economic downturn. The business that they run can also be a complicating factor if they ever divorce their spouse.

How can ownership of a small business impact a divorce?

Questions about employment

Often, successful entrepreneurs or business owners may hire their spouses, children and other family members not to provide support at the company. There can then be questions about maintaining ongoing employment after the end of a romantic relationship. The business owner may have to discuss the ongoing employment of their spouse and any other family members that they hired. Requiring that a spouse who works at a small business obtain a new job elsewhere may be a reasonable decision, but it can create a secondary source of strain for both spouses.

Uncertainty about its value

The economic value of a business can fluctuate given a variety of factors, including changing consumer demand and the current value of its facilities and machinery. Determining what the business is worth is often crucial to a fair outcome in divorce, as people need to consider the marital portion of the business’s value when making property division decisions.

Concerns about ownership

If spouses started the business together, both of them might want to retain the company after the divorce. Even if one spouse started the business, the other might have an interest in the company because of the decision to invest marital resources and the establishment or upkeep of the organization.

Addressing the ownership and operational control of a business can be a major challenge in the divorce, especially if both spouses rely on the organization for their income. The business could become a point of focus and contention during divorce negotiations. It might also be a challenge for a judge to address in the litigated property division case.

As such, spouses who have an interest in a business may need to take more time to prepare for their upcoming divorce than those with less complicated marital estates. Developing a workable plan for addressing high-value assets can be beneficial for those preparing for a pending divorce.