Here in Louisiana, divorces look a little different from those in other states throughout the country. Our state laws require that couples who choose to divorce divide their marital property equally, which removes some flexibility from the property division negotiations.
For those who own businesses, this can prove particularly difficult. A business is not only a complex asset, it is often the most valuable asset that a person may own. In a worst-case scenario, a business owner divorcing in Louisiana may need to close the business or sell it off to properly compensate a spouse for one’s share of ownership in the business as a marital asset.
However, this is not always necessary. A creative attorney may identify ways to keep the business together throughout the divorce process, whether the business counts as marital property or not. If you believe that your business may face dissolution during your divorce, don’t hesitate to reach out to an experienced attorney who can help you explore all your options and build a strong strategy for achieving your divorce goals.
Can you claim the business is separate property?
Ideally, every business owner should protect his or her business with a prenuptial agreement. Such an agreement establishes certain property is separate during marriage and does not count as marital property in the event of divorce. Unfortunately, many business owners do not consider the implications of divorce when founding or acquiring a business, and the opportunity to create a prenuptial agreement prior to marriage passes by.
Without a prenuptial agreement to keep a business separate from marital property, a business often converts to marital property once the marriage is official. If the spouse who owns the business founds or acquires the business after the marriage is already official, then the business often counts as marital property automatically.
However, if a business owner can prove that the business is substantially separate from the marriage, or if the other spouse agrees to set it aside from the property negotiations, then it may prove possible to claim the business is separate property.
In order to accomplish this, a divorcing business owner must be willing to sacrifice heavily in other areas to finalize the divorce and move forward.
If you find yourself in these circumstances, you should do everything you can to keep your spouse separate from the business. If he or she assists in the operation of the business, you must remove him or her. You must also make sure that your business finances and your family finances remain separate.
It is important to make sure that you pay yourself fairly, or you may find that your spouse claims you left money in the business instead of fairly bringing it home.
Can you negotiate for the business other ways?
If you cannot keep the business separate from marital property, then you have some very difficult choices ahead of you. In order to keep the business intact in this scenario, you must find a way to fairly compensate your spouse for his or her equal share in the business’s value.
The first step here is to assess the value of the assets you have available, including the business itself. You may need a professional business valuation to understand clearly how much you must compensate your spouse to keep the business intact. You certainly don’t want to overpay to keep the business because you have an inflated view of its value.
Finally, you must find other ways to compensate your spouse for his or her claim to an equal share in the value of the business, or your stake in ownership. This usually means sacrificing other assets, such as savings, investments, real estate and valuable belongings.
If you cannot satisfy your spouse’s claim with other assets, you may need to set up a payment plan over a period of months or years to pay off this debt and keep the business together.
However you choose to proceed, be sure to seek out proper legal counsel to ensure that you have all the guidance you need to protect your business and your future.