Small Business Brief

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Splitsville: A Guide to Divorce for Small Business Owners

If you’re in the throes of a divorce, the unfortunate truth is that have to take care of the assets that you want to maintain in the separation. This requires a good deal of thought, and depending on the nature of your relationship, could be a little messy. 

This is especially true if you’re a small business owner. We’ve thrown together a few tips for this situation. Hopefully, our guide to divorce when you’re a small business owner will be helpful for you in this stressful time. 

Guide to Divorce for Small Business Owners

Getting hitched and entering into business with your loved one is a dream for many. Working with your significant other on your small business makes communication, finance, and business strategy all the simpler. 

At the same time, the unfortunate truth is that almost half of all marriages end in divorce. It could have been that the stress of the business was too much to hold together, causing marital stress. It could have been an issue strictly contained to your relationship. 

The reality is, most people don’t know much about divorce because they don’t see it happening to them. If you’re curious about anything to do with divorce, take a look at these divorce faqs.

Whatever the case, something in the equation has led to a divorce. In the process of splitting up your assets, the small business could be the most challenging one to deal with. 

Ideally, you would have handled the legalities of what happens to the business before the idea of divorce was on the table. If you’re in that stage, or even if you have already begun to initiate a divorce, getting a lawyer is the first thing you should do.

Speak with a Divorce Lawyer

We’ll go into a little detail about what a lawyer can help you to sift out. There are a lot of specific pieces of the puzzle that must be looked at on an individual puzzle, but there are a few things that will greatly determine how, or if the business is divided.

The first thing to think about is whether the business is marital or separate property. This will depend on when the business was initiated and who originated it. 

If you or your spouse started the business in their own name before you were married, it will be considered separate property. That means that the business will be assigned to whoever started it if the other partner has no legal connection to it. 

The business is marital property if the two of you entered into business together after the marriage took place. So, if you and your partner started a business together or became business partners once you were already married.

There are some financial loopholes to examine here, however.

Separate vs Marital Property Income

If the business and marriage are kept entirely separate, the property will be divided by the rules listed above. That said, it’s very hard to keep your business and your marriage entirely separate. 

Let’s say that a husband owns a business before getting married. His spouse may have nothing to do with the business in any work or physical sense. Now, let’s say that the husband takes 30,000 dollars from the couple’s joint bank account to finance a new marketing campaign.

He uses the money wisely and finds that his company grows to be worth a few million dollars as a result of the marketing campaign. 

In the process of the divorce, his spouse would be entitled to 15,000 of the 30,000 used in the campaign, as well as half of the value that the money used brought for the company. 

So, if the company gained one million dollars from the 30,000 dollar investment, his spouse would be entitled to 515,000 dollars. 


Another aspect that a divorce lawyer can help you navigate is the idea of valuation. It can sometimes be difficult to know just how much something is worth, which things can be considered shared property, and how much of that property spouses are entitled to. 

The value of a business is particularly difficult to assess. There is so much equipment to value, money tied up in different places, and more. 

If your spouse has also hired already hired a divorce lawyer, it’s especially important that you do so as well. Different sides of the divorce will have different ideas and statements as to the value of the business. 

There will need to be some dispute and argumentation about the business’ value so that you can get your fair share of the assets. This is possible to do on your own, but lawyers have an understanding of the legal system that will leave you at a disadvantage.

Risks of Poor Valuation

Having an inaccurate valuation of a business could lead to extremely unfortunate consequences. 

Let’s look at another hypothetical situation. Say that a married couple is each entitled to half of a business’ worth.

Spouse 1 may look at the current value of the business, coming to the conclusion that each spouse is entitled to 50,000 dollars. Spouse 2, on the other hand, may have known the divorce was coming and withheld information.

Spouse 2 had a potential business deal that would skyrocket the value of the company to over two million dollars. After the divorce, spouse 2 is left with millions while spouse 1 only has 50,000. 

This is the result of a poor valuation of the company. While there is some legal work that can be done to try and sue spouse 2 for the equal share of the newly successful company, that will take years and thousands of dollars to do. 

It’s better to handle the valuation and division of property early with the help of a lawyer and avoid the complications of lawsuits and lost time and money. 

Working Out the Fine Details?

Dealing with the specifics of owning a business can be extremely difficult. Whether you need a guide to divorce from your business partner, or tips to get your employees into a more productive mindset, sometimes a little help is required. 

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