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A family business can lead to challenges during property division

On Behalf of | Jul 10, 2024 | Equitable Distribution

A major undertaking during a divorce involves trying to divide the assets that you accumulated during marriage. This includes everything from the marital home to the artwork adorning that home’s walls.

If your family has a business, that business may also be subjected to property division, unless the terms of a marital agreement dictate otherwise. There are several things to consider if you’re dealing with a family business during a divorce when there’s no prenup or post nuptial agreement involved.

Understand the financial reality

The financial state of the business can have a big impact on the property division process. When only one spouse knows about the finances, they may try to minimize the profit on paper so they can benefit from a larger portion of its value. One way they do this is to use tactics to make it look like the income of the business is smaller or the expenses are larger. It typically coincides with the decision to divorce. This is informally known as sudden income deficit syndrome.

Consider all options for the business

There are a few options that are possible when it comes to your family business during a divorce.

  • You or your ex can buy the other one out of their share.
  • The company can continue to be jointly run.
  • The business can be sold and the profits split.
  • You can close the company.

In order to make a decision, both spouses need a full overview of the business and what’s possible. Everything related to the outcome of the business should be in writing. This is especially important if you’ll continue to run the company with your ex.

The property division process can be complex, particularly in high-asset divorces that involve a family business. Learning your options and how they can affect the situation is important. Working with a legal representative who can assist with the process can be beneficial so that you can better ensure that your interests are being protected.