Owning a business with your spouse may have sounded like a great idea during your marriage. When you divorce, deciding what to do with the business can worse than deciding what to do with the kids. If you launched your business during your marriage, your spouse might be entitled to a share at the time of divorce.
As a business owner, you have likely spent much of your time, passion, money, and resources in setting up and supporting your business. You are proud of what you’ve accomplished, and you aren’t ready or willing to give it up. How can you keep your business?
The division of property in Virginia
Each state has specific laws on how couples must divide their assets during a divorce. All your assets are categorized into marital property and separate property. Marital property includes anything that you acquired during your marriage, such as your business, your home, or your car. Separate property includes items that you owned before the wedding, including property, a car, or an inheritance.
The state of Virginia only allows the marital property to be available for division during a divorce. However, Virginia is also an equitable division state, which means property division may not always be equal.
Your spouse may receive a percentage of the business if they:
- Worked as an employee in any significant role whether for pay or not
- Was a co-owner of the business
- Contributed to business plans or ideas
What does this mean for my business?
Unless you have a prenuptial agreement that identifies any business you have or start and says what will happen in a divorce, you will have to go through the process of dividing the business between you and your spouse.
If that’s the case, there are two options available for you:
- Buy out your spouse. If you want to keep the business and your spouse has no interest in being involved, you can buy out your spouse’s share of the company. You can determine the value of the business and pay your spouse directly or use your share of other marital assets. For example, you can keep the business but give your spouse a higher percentage of your home equity, stocks or retirement funds.
- Create a postnuptial agreement. A marital agreement also called a “postnuptial agreement” can still protect your business during a divorce. Virginia allows married people to enter into contracts that plan what will happen to certain assets during a divorce. This can include your business, and identify the amount of money, if any your spouse might get for their spousal interest in the business on divorce.
Either of these options may allow you to keep your business without having to become business partners with your ex-spouse. However, it’s important to remember that the divorce process can be challenging, and you may face unexpected obstacles. Consulting with a knowledgeable divorce attorney can help protect you during the divorce and ensure you can protect your business.