How Does Divorce Work For Business Owners?

How Does Divorce Work For Business Owners?

Navigating the divorce process is challenging for anyone. However, when you are a business owner in Michigan, the situation can become even more complicated. Asset division is an important step in the divorce process, and it can have far-reaching legal implications for your business. An experienced attorney from Lucido & Manzella, P.C., can provide crucial guidance during this difficult period. Call our office for case-specific legal advice.

Division of Business Assets in a Michigan Divorce

In a Michigan divorce, a business interest is treated like any other asset. It is potentially subject to division between the spouses. Depending on the circumstances, the court could award your spouse part ownership of your business. This can have an impact on partners, investors, and clients.

To protect your business interests during a divorce, it is essential to take certain legal steps ahead of time. For example, it is crucial to establish whether the business was started or acquired before or during the marriage. If it was before, you may have a stronger case for claiming it as separate property.

Is Your LLC Protected During Divorce?

Incorporating your business or setting it up as a limited liability company (LLC) certainly protects your personal assets from business creditors and liabilities. But does it protect your ownership stake during a divorce? Unfortunately, there is no definitive answer.

Even if you are a corporate shareholder or an LLC member, this does not conclusively protect your ownership stake. The court will consider several factors, such as the origin of the funds used to start the company or acquire your interest, whether your personal property is collateral for business loans, and whether you paid yourself a regular salary.

Impact of a Spouse’s Participation in the Business

If your spouse has been involved in your business, the court might conclude that they have earned an equity interest. This means they may be entitled to a portion of the business assets during the divorce.

To mitigate this risk, it is essential to maintain clear, accurate records. Document any money taken from your spouse or household accounts as loans to the business and pay your spouse the market rate for any work as an employee or independent contractor.

The Role of Prenuptial Agreements

For businesses started prior to marriage, executing a prenuptial agreement can solidify your case for separate ownership. As part of that agreement, you can stipulate that your business should be treated as separate property in the event of a divorce. If you do not have a prenup, it may still be possible to execute a postnuptial agreement under certain circumstances.

Contact an Attorney For Quality Representation

Divorce can be complex when a couple owns a business together. The process can impact not only their personal lives but also the future of their business. Having a prenuptial agreement and seeking advice from experienced attorneys at Lucido & Manzella, P.C., can help navigate the next steps efficiently.

With over 25 years of experience, our team of legal professionals is dedicated to protecting your interests at every stage of the legal proceedings. We provide tenacious legal representation and are prepared to fight for your rights. Contact us today to discuss your situation and learn how we can assist you.