Potential impact of divorce on a business

On Behalf of | Feb 14, 2023 | Divorce |

West Virginia business owners can face unique challenges when their marriages are coming to an end. A divorce case could potentially threaten the company or force its closure and sale without proper planning. Depending on the circumstances, the owner’s ex-spouse might retain an interest in the business, forcing the owner to continue dealing with them in the day-to-day operations.

Potential impacts of divorce on businesses

West Virginia is an equitable distribution state, which means that the marital assets will be divided in a way the judge views as fair. The division might not necessarily be a 50/50 split. Not all assets will be included in the marital estate, either. Assets owned by either spouse before the marriage will generally be considered their separate property and won’t be divided. If a business owner owned the business before getting married, it would normally be considered the owner’s separate property. However, if the value of the business grew during the marriage, the appreciation could be considered marital property and subject to division. Similarly, when a spouse has contributed to the business and has enabled its growth, the business could be at risk in the divorce.

How to deal with the situation

If the business is considered marital property, the following outcomes might occur:

  • The owner could buy out the other spouse’s interest
  • The other spouse could agree to accept a larger share of other assets in lieu of the interest in the business
  • The ex-spouse might continue working at the business, potentially causing conflict
  • The business could be sold, and the proceeds could be divided between the spouses

There are a few ways to prevent potential impacts of divorce on a business. Before getting married, the owner could request a prenuptial agreement that preserves their sole interest in the business. The owner could make certain the business assets are not commingled with the marital assets by keeping separate accounts and taking a salary instead of using business funds in the marriage. The business could be placed in a trust. If it’s already too late, the owner could negotiate with the estranged spouse to try to reach an agreement to retain control of the business in exchange for giving the spouse other assets.

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