THE REPRESENTATION YOU NEED IN ORDER TO PROTECT YOUR FAMILY
How to Navigate a Divorce When You Have a Family Business
Posted in Divorce on December 11, 2020
No one plans on getting divorced when they get married and start a family business together. If the marriage does end, issues related to the family business can lead to a complicated legal battle. You may not know how to divide your business or its assets fairly or how to prevent a judge from intervening. Use this information to successfully navigate your divorce with a family business.
How Does Colorado Divide Assets During a Divorce?
Part of how you will divide a family business is how the state handles property division in a dissolution of marriage. Colorado is not a community property state, but a marital property state. If a divorce case in Colorado goes to trial, a judge will divide property acquired during a marriage equitably. While this almost always means equally, an unequal split is possible if a judge deems it fair for both parties.
When dividing assets, a court will only touch marital property. This is property obtained together during the course of the marriage. It does not apply to a business purchased separately, brought into the marriage by one spouse, or given to or inherited by one spouse. All couples in Colorado can agree to a different property division scenario before a judge will intervene.
Who Gets to Keep the Family Business?
When it comes to dividing the family business, you and your spouse can either work together or go to trial. If you have a prenuptial or postnuptial agreement, it may come into play. Otherwise, you and your spouse have the chance to work together to compromise on a solution that works for both of you. Many different options are available.
- One of you keeps the business. One spouse can keep the family business for him or herself after a divorce. The person who retains the business, however, will need to give the other financial compensation for the full value of his or her financial interest in the company.
- Both of you keep the business. You can agree to continue maintaining the family business together. If either spouse decides to get out later, the remaining spouse has the right to purchase the other spouse’s share of the business.
- Neither of you. You can decide to sell the business at its current market value and divide the profits between you, meaning neither person gets to keep the family business. This might be the right choice if you both desire a clean break.
- You create a trust. If you wish to protect the assets from a family business to give to a child, you can create a generational wealth trust. With this type of trust, your family can pass money from a family business to future generations, allowing it to grow and protecting it from taxes.
The best option for you and your business will depend on the circumstances. Working together with your spouse is the most effective way to remain in control of what happens to a jointly owned business. Increase your chances of a successful settlement by hiring a divorce lawyer.
A Lawyer Can Help
Dividing a business is a complex matter. You and your spouse will need to analyze your ownership structure, look at the interests you both have vested in the family business and understand the current value of the company. You will also need to think about how you plan on protecting your family’s business interests, including your child’s inheritance.
Having a family business can make divorce more complicated. If you and your spouse are having trouble working together on the right solution, an attorney can guide you through the process of mediation. This out-of-court process could help you compromise on a settlement and avoid going to trial. A Colorado family law attorney can accurately valuate the business of your company, help you with property division and represent you if the case goes to trial.