How to Protect Your Family Owned Business in a Michigan Divorce
Division of assets is part of any divorce proceedings, and a family owned business could fall under the category of business assets, even if it was owned by one party prior to marriage or inherited during the marriage, for example. Whether you have a business before marriage or you start one during the marriage, however, you need to make sure the business is protected in the event of divorce. How can you do this in Michigan? Here’s what every business owner should know.
The best way to protect a family owned business is to plan ahead, and this means creating a prenuptial agreement (or a postnuptial agreement if the business comes after the marriage). This will spell out how the couple wishes to handle division of this asset in the event of divorce, with both parties signing a legal agreement to that effect. Should a divorce occur, the matter will be handled according to the provisions of the prenup or postnup, hopefully making the separation a little less stressful.
Avoid Using Marital Funds
There are several conditions that could cause a pre-owned family business to become marital property, and one of them is using marital funds for the business. This automatically makes the business, or at least a portion of it, marital property and it can jeopardize the future of the business in the event of divorce.
Avoid Spousal Contributions to the Business
Another way a business can become a marital asset is if both spouses contribute to the business in some way. Even if one spouse owns a business prior to marriage, it can become marital property if the other party participates in operations during the course of the marriage. If a non-owning spouse takes on an executive role, an argument could be made that the business has become martial property.
Protect the Business
What if you failed to set up a prenuptial agreement or you were both involved in funding and/or managing the business throughout the course of the marriage, making it a marital asset? In this case, it’s probably wise to act in the best interest of the business. This money-maker supports both spouses and the family, and it will continue to do so if a couple makes smart choices moving forward.
This could mean allowing one spouse to buy out the other. It might mean continuing to have a business relationship and running the business together (although this isn’t always the best solution, especially in cases of contentious divorce). Just keep in mind that a business that makes money is good for everyone involved. Even if you sell your share of the business, profits earned by the remaining owner will continue to benefit the family, potentially providing for spousal support, or at least child support, if children are involved.
Protecting a family business can make even an amicable divorce messy, and you naturally want the best chance to keep the business open and functional. The expert attorneys at The Gucciardo Law Firm can help you to protect your interests. Call today at 248-723-5190.
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