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When a business owner goes through a divorce

Divorce is a stressful time for anyone, but if you are a business owner, you may have additional worries on your mind. How much is your business at risk as you move through the divorce proceedings, and how much is your spouse entitled to in terms of a divorce settlement?

Since your financial future and your livelihood are at stake, this is no small matter. 

Marital or separate property

If you were a new business owner when you first married, but now your business has grown and generates a healthy income, your spouse may claim that he or she has a stake in the business. Even if your spouse is not a co-owner, the court could see the business as marital property. The claim could be based on your spouse's personal or career sacrifices that he or she made in order to help your business succeed, or even financial contributions. The court is likely to see any of these as valid reasons that your spouse has a right to some of your interest in the business.

Source of income

If your business has been successful, it may have been the primary reason for the marital assets you have accumulated, as well as a valuable asset on its own. If you have managed to keep the business as a separate property, what about the income it has generated? All of your earnings during the marriage, and your spouse's as well, for that matter, are marital assets, and the purchases you made while married are also marital property that must go through the property division process.

Possible solutions

The judge will probably not recommend that you divide your business in half. You will need to have a professional appraiser determine the fair market value of your business, and then you can use that dollar amount to begin negotiations. Many business owners choose to allow the other spouse to keep more of the marital assets, such as the home and retirement accounts, so that the business can remain whole and profitable.

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