How does divorce affect you when you own a business? In Utah, marital property is divided by the courts equitably. Equitably means fairly, though not necessarily “equally.”
If you started a business during the marriage (or even before the marriage), that business can be divided and awarded in a divorce the same as any other kind of property. But simply being married to you does not automatically entitle your spouse to a share of your business ownership or its profits.
Your spouse might decide to argue (whether truthfully or falsely) that he or she acquired an interest in the business by helping you start it, run it, build it up, or promote it. He or she may claim that by “keeping the home fires burning” you were able to devote your time and efforts to your business such that your spouse deserves a share of the business now. You also need to be on the lookout for double dipping claims where spouse may ask for a portion of your business and for you to pay child support and alimony out of this business as well.
Of course, if your spouse claims an interest in your business, he or she will need to prove (by a preponderance of the evidence) that he or she made the contributions claimed. Remember, simply being married to you does not automatically entitle your spouse to a share of your business ownership or its profits.
If you started, ran, built, and maintained the business all by yourself, without much or any help from your spouse, your spouse may get little to nothing of the business itself.
So what do you do if the business is a marital asset and needs to be divided between you and your spouse? First, you want to establish the real value of the business. There are professional business evaluators who can help you ensure you do not under- or over-value your business if it will be affected by divorce. Not all evaluators are created equal—do the research and find a competent one. Once you have a firm grasp of the value of your business, you may find creative ways to keep the business with you, without having to carve it up or sell it off to satisfy your spouse.
While you could sell the business and divide the proceeds, just because a business may be ordered “divided” does not mean you must cut it up or “kill” it by selling some or all of it and splitting the proceeds of sale. Another option is for you to buy out your spouse’s interest, so that you keep the business. You could buy out your spouse with a single lump sum payment or pay your spouse over time in installments (this would not be alimony, it would be paying your spouse his/her share of the business interest and be separate from and in addition to alimony, if alimony is awarded).
You could, as another option, agree to trade the value of other marital property, so that you keep the business, such as agreeing to have your marital home awarded to all to your spouse and the business awarded all to you, if they are of equivalent value.
And although it’s rare (for reasons that should be obvious), you and your spouse could also agree to continue owning and/or running the business together, even after the divorce.
Whatever you end up doing with the business, know that you have options. As much as thinking about and working at divorce hurts, take the time, care, and effort to determine what your options are, so that you know what the best one is for you and your family.
If you would like to discuss business valuation and division in divorce in greater detail, please give us a call at801-466-9277 and meet us for lunch sometime. We’d be happy to talk about the specifics of your business and your particular circumstances.