Are Businesses Subject to Property Division During a Divorce?
In Florida, when a couple divorces, their shared marital assets will be divided as part of the divorce process. Florida is an equitable distribution state. This does not mean that property must be split 50/50. Instead, the courts focus on dividing property fairly and equitably.
When determining if a business is subject to property division, it must be determined if it is a marital asset or a separate/individual asset. Identifying what assets are shared and those that are separate is a complicated process, and all a couple’s assets and debts must be thoroughly evaluated.
Common issues that arise when determining whether a business is a marital or separate asset include:
- When the business was founded and by who
- Who funded the business and with what assets
- Were business assets and marital assets ever comingled
- How did both parties contribute to the business during the marriage
- Any existing prenuptial or postnuptial agreements that directly deal with the handling of the business
If you own or have a share in a business and are going through a divorce, you must work with a skilled attorney during the divorce process. While most non-marital assets will not be subject to property division, this is not always the case, and your business could be at risk.
Common Ways Businesses are Divided During Divorce Proceedings
Because Florida does not require an equal split of marital assets, the couple in question can work together to divide their assets in a way that is fair and which potentially keeps certain larger assets, like a business intact. For example, one spouse may take on more of the marital debt in exchange for retaining the business. How a company is divided will also depend on how the business is valued and how it is structured.
To learn more about how businesses are divided during a divorce, review our blog on the topic here.
Avoid Commingling Business & Marital Funds
Whether you own your business or are a shareholder, if the business is determined to be marital property, your former spouse may be awarded a portion or shares in the business. One of the best ways to protect your business interests is to keep your business assets separate from your marital assets. Relatedly, if you own or are involved with more than one business venture, you want to keep all of your business funds separate and clearly organized. Comingling your assets makes determining whether a business should be classified as marital or separate property incredibly difficult.
Two of the most highly effective legal methods to safeguard your business from divorce include:
- Establishing a prenuptial agreement before marriage
- Establishing a postnuptial or marital agreement after marriage
Though many people find marital agreements like pre- and postnuptial agreements unromantic, proactive planning is crucial to safeguarding your business interests. Contrary to popular belief, a prenuptial agreement does not indicate a lack of faith in the relationship. Instead, it’s a good opportunity for a couple to get on the same page regarding their finances and an opportunity to establish a mutually beneficial plan in case the unexpected or unthinkable happens.
Can I Use a Trust to Protect My Business from Divorce?
In some situations, you may also be able to protect your business from a divorce by placing it in a trust. When a business is placed in a trust, the trustee acts as the business owner, managing it for the beneficiary of the trust. However, there are many different types of trusts, and you will want to work with an experienced lawyer (like ours at The Virga Law Firm, P.A.) to ensure that you are establishing the correct type of trust for your situation.
To learn more about how trusts can protect your assets during a divorce, review our blog post here.
Why You Need an Attorney
If you own or have a share in a business, you should consult with an attorney about protecting your business from a divorce, no matter how large or small your business is. While it may feel unromantic, the future is never guaranteed. Being prepared can protect your business interests and spare you and your spouse a lot of stress and heartache should you unexpectedly divorce in the future.
To find out how you can proactively protect your business from a divorce, reach out to The Virga Law Firm, P.A. for guidance. Our attorneys are prepared to discuss your options today.