One of the hardest things for most folks who get divorced in Tennessee, aside from working on a Parenting Plan, is trying to divide up assets. Even the most amicable couple might still get a little riled up over who’s going to keep the car (or, Heaven forbid, the dog), and who has the most right to the expensive furniture. When one of you owns a business, though, the division of assets becomes a whole ‘nother ball game.
I’ve worked with a lot of Maryville business owners on their Wills and estate plans, and my experiences there prove helpful to couples who are seeking a divorce, too. I want to offer Tennessee business owners some food for thought about the potential pitfalls they might face if their marriage ends. Trust me: it could save you a lot of grief later.
Business ownership, assets and the division of property
Let’s start here: in Tennessee, marital property – property that is acquired during the marriage, or property that is purchased, managed, etc. by both spouses, financially or otherwise – is subject to equitable distribution. In other words, if a business is purchased during the time of your marriage, using joint funds, then that business is subject to division if you and your spouse decide to divorce. Even property owned by one party before the marriage can eventually be “transmuted” into marital property depending on the actions of both parties after the wedding vows.
However, that business may also be subject to division even if it was purchased by one of you before you were married. For example: let us say your spouse owned a printing company before you got together. During the time of your marriage, you had nothing to do with that company at all… except sometimes you’d take customer orders on a busy day, and sometimes you or your spouse dipped into your personal accounts to buy new machinery or wall paint, or perhaps you always did the taxes for the business because you’re the “go to” tax person in the house. If you and your spouse get divorced, you will likely be entitled to part of that business even though he or she bought that company before you were married.
Tips for protecting your business
Your marriage may last for 50 years, or you could decide to get divorced after five; it’s better to have a plan no matter what the future holds. You want to protect your business as best you can in the event of a divorce, and here are a few ways you can do that:
- Sign a pre-nuptial agreement. If you own the business before you get married, get a pre-nup. If you didn’t sign a pre-nup, come talk to me about a post-nuptial agreement. Together we can make a plan for your business.
- Keep your marital accounts separate. Don’t borrow from the family funds, or use personal accounts to pay for anything for the business. Hire a separate accountant, too, if you can.
- Have a neutral party conduct your business valuation. One of the things I do for my clients is work with financial experts to place a fair valuation on property. In the event of a divorce, your spouse’s attorney is going to do the same. You may want to work with a neutral third-party, too, to assess the value of your business.
- Consider a buy-sell agreement. Buy-sell agreements outline what happens to your business in the event of a major change – and divorce fits that bill.
- Give up other assets. If you want to keep your business, you may need to be willing to give up other property you have. You might also be able to work out a deal with your ex to pay him or her over time for his or her share of the company.
Divorce is hard enough, but when there is a business on the line, it can be even more challenging. As a Maryville divorce attorney, I help families just like yours get through the process with as much of their lives as possible intact.