How to Deal With Divorce in Michigan When You Share a Business With Your Spouse
Divorce is never easy. In addition to the emotional turmoil of separating from a person you once loved, or may still love, you have to cope with tangible aspects of separating your lives, including splitting up a household and deciding who gets which assets and who takes on what debt.
In Michigan, separation of assets is generally done in a fair and equitable manner. Because Michigan is not a community property state, though, this means division of assets may not necessarily come out to an even, 50/50 split. Courts want to make sure that distribution of assets is equitable, not necessarily equal.
Division of assets can be particularly difficult when a divorcing couple shares a business, especially when it comes to determining what is “equitable”. How do you go about splitting a business down the middle if you don’t want to sell it to a third party or shut it down? There are a few options to consider.
Before a business can be divided in a divorce, it must first be determined if the business is considered marital property. Just to be clear, even a business that was started before the marriage could be considered marital property if marital funds were funneled into the business and/or both spouses participated in managing the business.
Next, the business will have to be valued, which could entail bringing in experts (accountants, appraisers, etc.) to determine the actual value of the business. From there, a divorcing couple can determine how they want to go about dividing the business.
One Partner Buys Out the Other
In cases of contentious divorce, this is almost certainly the best option because it allows for a clean separation. Once the business has undergone valuation and equitable division has been determined, one spouse could make arrangements to buy out the value due the other party. This could be done in a lump sum at the time of the divorce or with ongoing payments, depending on what the couple agrees on.
Separate Areas of Operation
If neither spouse wants to give up their share of ownership in the business, the couple will likely have to remain partners. How can you do this if you can’t get along? If you have several business locations, you could split them, with each partner taking full ownership of certain locations. Or you could simply manage different aspects of the business while remaining partners. However, this might not prove realistic following a contentious divorce.
Ideally, divorcing spouses will maintain an amicable relationship and continue to operate their business as professional partners. If you’re able to do this, both of you can continue to reap the rewards of business ownership. This won’t work for every couple, but those that can pull it off need not go through the complex process of equitable division.
If you’re involved in a divorce that includes a business, your interests will be best served by working with the experienced professionals at The Gucciardo Law Firm. Contact us today at 248-723-5190.
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