What Happens When Business Partners Divorce?

If you and your spouse divorce in the State of Michigan, you will need the advice and services of a metro Detroit divorce lawyer from the beginning of the divorce process. If there is a dispute regarding marital assets and properties, your lawyer will try to settle that dispute out of court.

When you and the spouse you are divorcing are also the co-owners of a business, that business is considered marital property by the Michigan courts, which means that each of the divorcing spouses will be legally entitled to an “equitable” share – roughly half – of the business.

In such cases, the court may order a valuation to determine the value of the business, but what happens then? How can your business continue if it loses half of its value? A metro Detroit divorce attorney will help you protect your business and other long-term interests in a divorce.

How is a Business Divided in a Divorce?

Dividing assets and properties when spouses divorce may sound easy, but in many divorces, the division of marital assets and properties is difficult and acrimonious. How will a shared business be divided, and will a divided business be able to survive?

The division of marital assets in a Michigan divorce must be “fair and equitable.” The division of assets is not necessarily a precise 50/50 split. So long as the distribution of assets is “equitable,” it does not necessarily have to be perfectly equal.

A divorcing spouse may also be entitled to an equitable share of the other spouse’s business even if that spouse is not a partner in the business. A business that was started by only one spouse during the marriage, is still considered to be marital property under Michigan law, and therefore subject to being divided in a divorce. A business started before the marriage by only one spouse may also be deemed marital property if marital funds were channeled into the business or if both spouses had roles in the operation or management of the business. A business started before the marriage may also be controlled by a prenuptial agreement, if there is one.

What Happens When a Business is Valuated?

If a business – or the ownership of a business – must be divided by the court in a divorce, that court will require a business valuation. A business valuator typically reviews financial and legal documents such as bank statements, balance sheets, and tax returns.

A business valuator may visit the business, its production facilities, and its main offices. It is imperative for the spouses to cooperate with the valuator and make all of the financial records of the business available. Honesty and transparency will help the couple avoid unnecessary delays in the divorce process.

Several valuation methods, such as income-based, asset-based, or market-based approaches may be used to reach a fair and accurate estimate. Finally, a business valuator will prepare a valuation report that estimates the current and projected future value of the business or ownership interest.

If one of the spouses disputes the valuation report and hires another valuator who prepares a differing estimate, that valuator may be asked to testify, and after considering the testimony, a judge will then assign a dollar value to the business and divide that amount between the spouses.

What Will Happen to Your Business?

There are several ways to resolve the division of your business if the person you are divorcing is also your business partner. The most common resolution, when divorcing spouses are business partners, is for one partner to buy out the other and purchase that partner’s share of the business.

In some cases, a couple may be able to continue operating the business as partners. Some couples actually have more success as business partners than as marriage partners. Of course, this option probably will not work if there are still unresolved issues and hard feelings after the divorce.

The final option is selling the business to a third party and dividing the proceeds, but this option is usually a last resort when the division of the business cannot be resolved in any other way.

How Will a Divorce Lawyer Help You?

Business ventures and marriages are both unpredictable, and every divorce is both difficult and complicated. A divorcing couple’s jointly-owned properties and assets must be divided as well as the couple’s joint debts. In some divorces, alimony must be considered and decided upon.

If the divorcing spouses are parents, the custody and child support issues also must be resolved, and a parenting plan and visitation schedule must be agreed to by the spouses or imposed by the court. Divorce is complicated enough without the added stress of dividing a business.

In or near the Detroit area, letting a metro Detroit divorce lawyer handle these matters on your behalf is a wise choice. You will need to be advised and represented by a divorce lawyer who has substantial experience handling and resolving the division of marital properties and assets.

What Else Should You Know?

If the spouse you are divorcing is not a co-owner of your business, if marital funds were never commingled with business funds, and if your spouse had no role in managing or operating the business, you should not simply presume that you will lose half of your business.

Your attorney will work diligently to prove to the court that the business is your personal asset and is not subject to division. However, if your spouse is a co-owner of the business, that ownership interest will be deemed a marital asset that may be divided in a divorce proceeding.

Who Should Represent You in Your Divorce?

Since 1988, the American Divorce Association for Men (ADAM) has represented men in the Detroit area in matters of family law. Our attorneys provide frank advice, protect your rights, and make sure that you receive what is rightfully yours at the conclusion of the divorce process.

A metro Detroit divorce attorney at the American Divorce Association for Men will advocate diligently and effectively on your behalf. From your first legal consultation until your final divorce decree is issued, our legal team will ensure that you are treated fairly by the court.

We’ll assess your legal needs and bring your divorce to its best possible outcome. If you choose to divorce, or if your spouse has chosen divorce, call the American Divorce Association for Men promptly at 248-290-6675 for an in-depth, no-cost evaluation of your case with no obligation.