Divorce is the most difficult point in any marriage. Unfortunately, the emotional and financial stress of a divorce is very often compounded when one or both spouses own a business. When divorce enters the litigation process, both spouse’s assets are subject to “equitable distribution.” Unfortunately, “equitable” does not necessarily mean “equal,” rather, it tends to mean “fair and just” in the eyes of the court. If you believe your business may be in jeopardy, here are some of the questions you may have:
What is the difference between marital property and exempt property?
When your divorce enters the litigation process, the courts will determine whether you and your spouse’s assets are marital property or exempt property. Essentially, exempt property is generally considered assets that were obtained either before, or outside of, your marriage. The following assets are generally considered exempt from the litigation process:
- Inherited assets
- Property acquired before your marriage
- Assets designated as exempt within a written agreement
How is my business valued?
Courts will analyze several factors when determining how your business is valued and how much of it you are entitled to. Sometimes, the court may even mandate an inquiry into your business practices and expenses, on top of requesting access to additional business records. If you or your spouse do not submit this information truthfully and correctly, you and your business may be subject to an investigation by the IRS. Do your best to avoid this. Hire an experienced attorney who can help ensure you submit all the necessary information to avoid any discrepancies down the road.
Can I protect my business from a divorce?
Fortunately, there are several things you and your spouse can do to protect your business from a divorce. For example, if you and your spouse jointly own a business, you may draft a shareholder agreement, which can detail how each party’s interest in the company is valued, assign ownership, and limit the transfer of ownership to another party. You may also address business-related issues in a prenuptial agreement, which you and your spouse may draft before marriage.
A prenuptial agreement can also protect any other assets you own, as well as outline what should happen with your assets, should you or your spouse pass away or get a divorce.
If you have not drafted a prenuptial agreement, you and your spouse may still draft a postnuptial agreement. A postnuptial agreement can address all the issues a prenuptial agreement can, only it is designed to be drafted after you are already married. If you have any other questions, feel free to reach out to our compassionate and knowledgeable firm.
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Ross and Calandrillo, LLC is a full-service divorce, family, and real estate law firm located in Mountainside, New Jersey. One of the most important things you can do when going through a divorce is to hire a knowledgeable and compassionate divorce attorney. Do not settle for less than you deserve. For strong legal representation in all of your divorce or family law matters, contact Ross and Calandrillo, LLC to schedule a consultation.