Love’s a risky business. But when your contentious divorce conquers love, your actual business may be at risk. The seemingly sound solution is to dissolve the business you co-own with your ex-spouse altogether. After all, it seems impractical to maintain professional relations with someone you also have personal disputes with. It may only disrupt your daily operations, lower employee morale, and discourage potential customers and partners to transact with your company.
But if you still consider business dissolution as a possibility despite its drawbacks, you must know that there are other far more complex factors you must contemplate if you have a business caught in the middle of your Michigan divorce.
Business considerations during divorce
If you and your spouse decide to continue running the business, the first thing to do is establish which business interests fall under a marital property classification. If you started the business during your marriage, Michigan law dictates that it’s marital property subject to equitable distribution. This type of distribution is a principle where the court evaluates specific factors to determine what’s best for your unique circumstances.
After the valuation of your business’ assets and liabilities, you may move forward learning about your options on settling a property division agreement.
- Buy out your spouse: If you have a controlling interest, you can buy out your spouse. But you must have sufficient cash or liquid assets to purchase your spouse’s valued shares. In other cases, you may also consider financial loans or other marital assets equal to your spouse’s business shares.
- Sell your business: If you mutually agree to sell, you can eventually divide the income equitably. However, this may take longer as you must agree to a sales price. Depending on how your business attracts its intended market, it may also take years for you and your spouse to profit from it. The waiting time may influence your income and earning power pivotal in other divorce issues, like child and spousal support.
- Continue co-ownership: If you’re capable of setting your emotions aside and maintaining business as usual, it’s possible to keep your business open while you divide gains and losses with your spouse.
If your business is a sole proprietorship, it will only be a separate property if you owned it before the marriage. But if you had it during the marriage, it may be a marital property, unless a premarital agreement states otherwise.
The future of your business
Securing the future of your business is only a portion of a larger pie of issues you must overcome during the divorce process. You can prevent devastating blows to your financial future by having a legal counsel to discuss your options clearly and untangle all legal complexities.