What happens when spouses share ownership in a business during a Louisville divorce? Many spouses acquire or start a business together, each working hard to make that business profitable and successful. What happens to a company owned by both spouses during a divorce in Kentucky?
The answer to this question will be based on the nature and relationship of these co-owners. Can the business continue to succeed without either or both of the soon-to-be former spouses? Does each party contribute equally to the company or is one of the parties genuinely the central element in conducting business and serving new and existing customers? Will it be possible for the two owners to continue working on the business together professionally once the divorce is completed?
The fact that many of the parties who seek a divorce understand the importance of removing as much emotion as possible from each important decision in their case is quite encouraging. Emotional decisions are almost, without exception, poor decisions. You are about to make some of the most important business, financial, and family decisions you may face in your lifetime. These decisions should be taken with a clear mind and with sound advice and counsel from your experienced divorce and family law attorneys at Dodd & Dodd.
The fact that the spouses share ownership in a business may not impact the ability to continue business operations now and in the future. When the former spouses can preserve professional business communications and decision making processes, they should both be able to retain their ownership interest in the company they share.
It is important to understand the concepts of “marital” property and “separate” property. Marital property is generally any asset or debt acquired by either or both parties from the date of the marriage to the date of separation, with few exceptions. Separate property typically refers to any asset or debt owned or acquired by either spouse before the date of the marriage or after the date of separation (as long as marital funds and labor were not commingled with that separate property).
In this example, the business would almost certainly be considered marital property. If the parties are unable to work together or continue business operations as co-owners, the process would generally come down to 3 steps:
- Establish a thorough and professional valuation of the company. The Court will usually establish the process for assessing an accurate valuation.
- Determine the marital interest (equity) each spouse holds in the company.
- Either sell the company and divide the remaining equity, or, in the event one of the spouses wishes to keep that company, they would be required to “offset” or “buy out” the other spouse’s marital interest. This can often be accomplished in exchange for equity in the family home and/or the division of retirement assets.
This is why it is important to work with the experienced divorce attorneys at Dodd & Dodd. We are business owners ourselves. Allen M. Dodd is a tax attorney who can help to evaluate not only the valuation of assets but the tax implications of these decisions.
Our experienced attorneys have represented business owners and professionals in practice who are seeking a divorce here in Louisville for decades. We are skilled advocates with proven strategies who work to protect our client’s interests and objectives.
What happens when spouses share ownership in a business during a Louisville divorce? What is the best way to protect your interest in the midst of these complex legal and financial issues? We invite you to review the strong recommendations of our former clients and the legal industry and contact Dodd & Dodd or call 502-584-1108 to schedule an appointment with one of our attorneys.
