Divorce is a complex process with potentially wide-reaching legal implications for all parties. The addition of a family business further complicates these issues, and men may struggle to protect their ownership of the business over the course of a separation.
Transitioning a business through divorce requires a deep understanding of property laws, tax implications, and family law, among other facets.
Therefore, it is wise for divorcing men to collaborate with a legal team or divorce attorney to protect their family legacy when business ownership is threatened by divorce proceedings.
Securing Ownership of a Business
During a divorce, each person’s assets are determined to be either marital or non-marital property.
- Marital assets are those gained during the marriage and may be subject to division upon divorce.
- Non-marital assets are acquired outside of the marriage, such as retirement contributions made when the parties were single, and are not subject to division upon divorce.
Determining whether a business should be classified as a marital or non-marital asset should be addressed by an attorney. The answer may be complicated due to a company’s tangible property, intangible property, assets, and at what point these elements were created or realized.
For a business to be deemed a separate or non-marital asset, the owner must present proof of their ownership. In the case of business inheritance, the will that appointed the inheritance is commonly used as evidence.
Keeping clear and accurate finances is essential in securing ownership. Finances related to the business should be held in a separate account under one spouse’s (the business owner’s) name.
In this way, the court is able to see that ownership belongs to only one spouse.
Management of Finances
Clear and accurate financial planning is helpful when dealing with the business’ tax implications during a divorce. Transferred assets can be moved tax-free in some divorce scenarios, and once ownership has been established, each person is responsible for paying taxes on the assets that they own.
In the case of business division, clear and accurate financing also clarifies how money is moving within the company. Detailing where money came from and how it was spent can prevent an ex-spouse from attempting to claim ownership by arguing that marital funds contributed to the business.
Additionally, an attorney will build a case based upon financial documentation from the entirety of the marriage.
The business owner should be prepared to provide documents such as mortgage statements, credit card and bank statements, bills, debt documentation, life insurance policies, and more.
Presenting a prenuptial agreement may also be extremely helpful in determining ownership, especially if the business existed prior to the marriage’s official date. However, be sure to secure the representation of an attorney before making substantial financial changes to the business.
Certain acts, such as withdrawing large amounts or all of the assets in a business profits account, can be viewed by the court as an attempt to circumvent the legal system and the equitable distribution of assets.
An attorney can advise you on how to organize your business’ finances to best navigate the divorce process.
Importance of Ownership
Each person’s reasons for wanting to preserve their business through a divorce will vary, from financial incentives to the importance of the business’ history in the family.
Owning a business means being associated with that business’s reputation and legacy, which one party may have spent a lifetime building.
In the case of an inherited business, the values and goals that have been shared and passed down by the business’s predecessors may serve as an incentive.
An attorney will assist you with conveying the importance of the business during a divorce and establishing a quantifiable value for this asset in addition to its financial worth.
Supportive Leadership
As a business weathers divorce proceedings, ownership of the company may be threatened. Continue to prioritize the success of the business and its employees during the process of new, changing, or temporary ownership.
Networking outside the company is one method of doing so. Additionally, every business exists as the conglomerate of its employees; creating a network of relationships within the company is equally beneficial during this challenging time.
A company owner should prioritize their employees and create a pleasant working environment to ensure that the business does not falter while ownership is called into question.
Protect Your Family Legacy During a Divorce
Divorce can be especially challenging for men who own businesses, and it is essential to work with an experienced attorney who can help you maintain ownership during this challenging time.
The attorneys at Milstein Siegel can help you protect your rights as a business owner and secure your company against division during your separation. Contact Milstein Siegel to schedule a consultation.