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What happens to your business if your spouse files for divorce?

On Behalf of | Jan 20, 2021 | Divorce, Divorce Involving A Business |

Other than your family, your professional success is one of the biggest defining features of who you are and how you view yourself. If you started and run a small business or professional practice, that company is probably a big part of your personal identity.

It may also represent hundreds of hours of your labor and thousands upon thousands of dollars worth of personal investment. If things haven’t been going so great in your marriage recently, you may be grateful that your business provides you with a sense of purpose and personal success.

You may also become increasingly aware of the potential for your spouse to try to take your business if you divorce. Is that possible under Indiana law?

Could your spouse have any kind of claim to your business?

Businesses are like any other asset. They may represent financial value and also have some debts or liabilities attached to them. The courts will want to determine the overall value of the business and whether it is marital property or separate property to decide whether they split it up in the divorce.

Assets that you acquire during the marriage, including income that you earned and returns on investments, typically constitute marital property. Things that you inherit, gifts from others, property set aside in a marital agreement and assets that you owned already when you got married are usually your separate property.

If you started the business during your marriage, it is probably marital property. Even If you inherited it or owned it prior to marriage, if your spouse made financial or practical contributions to the business or if you used marital income to run the company at any point, your spouse could potentially have a claim to at least some of the value in the business.

How might the courts address the business itself?

Exactly how the court handles dividing the business’s value will depend on a number of factors. In Indiana, equitable division is the rule of the land. The goal for the courts is to find a fair way to split your property.

That might mean determining the value of the business and your spouse’s interest in it and then awarding them other assets that represent that amount. The courts might also order you to sell some assets to buy out your spouse’s interest in the business. They might give your spouse partial ownership interest in the business or even order you to pay a portion of profits in the future to your spouse as a way of compensating them for the business’s value.

Negotiations before divorce can give you more control over these terms. Otherwise, you may need to develop a strategy to protect your business during a divorce.


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