Every 13 seconds, one couple files for divorce; accounting for 43 percent of marriages that end in divorces annually in the US. Along with the divorces are businesses that lose their ground. While no one gets into marriage and even has kids planning to get divorced, unplanned circumstances result in the inevitable. Despite this being a harrowing time for you, understanding what happens to your business during the divorce is crucial.
Aspects of business that change after a divorce
Your Ex-spouse turns into a business partner
You might not have signed up for this, and you might not be in good terms with each other but, you might end up sharing a business after your divorce is final. However, this determination depends on the state you live in.
Note, however, that the decision to share the business, dissolve it, or the business remaining under your ownership or your spouse’s depends on whether the business is regarded as marital property or not.
All assets acquired in the course of a marriage fall under the marital estate/property category, and they are divisible between the partners equally or depending on the percentage of either party’s contribution to the business.
- If you start a business after you tie the knot, the courts will apply the equal split criteria (50-50 share) unless you can provide documentation to prove that your investment in the business was more than your spouse’s. You can only protect your contributions to the business by keeping a record of all the finances you injected into the business.
- Intellectual property: during the divorce proceedings you have to name the owner of your trade secrets and intellectual property. Since such rights are hardly divisible, it’s important to have documentation showing who owns the rights. Doing this prevents a scenario where you