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Community property may impact divorce for business owners

On Behalf of | Apr 1, 2020 | Firm News |

Couples who divorce in Louisiana must divide their marital property equally, rather than equitably, according to our community property laws. For business owners, this can cause significant concerns.

When one spouse in a couple owns a business, that business may count as marital property, depending on the involvement of the other spouse in the business and any protections that the owning spouse has in place. Without a clear divorce strategy, a divorcing owner may also lose the business, or it may suffer serious setbacks.

If you are a business owner and face divorce in Louisiana, it is wise to build a strong divorce strategy to protect your rights and interests. Understanding the issues at hand and the tools you have available helps ensure that your rights remain secure while you work through the divorce process.

Does your business have divorce protection already?

If you and your spouse crafted a prenuptial agreement before your marriage, it may include protections separating your business apart from your marital property. Of course, not all prenuptial agreements are equally strong. Be sure to review this document carefully to identify any mistakes or questionable terms. You can build a stronger strategy for your divorce if you identify any problem areas ahead of time and prepare for them.

Can you claim the business as non-marital property?

In some cases, courts may allow a business owner to claim a business is not marital property, even without a prenuptial agreement. In order to make this claim successfully, an owner must show with clear documentation that their spouse has little or no involvement in the operation of the business.

An owner making this claim must also demonstrate that their family finances do not commingle with the business finances. If you have grounds to claim your business is not marital property, be prepared to show clear financial documentation to back the claim up.

Negotiating business value in a divorce

Even if you cannot keep the business completely out of the divorce, you may have opportunities to keep it intact and absorb losses elsewhere. If your spouse has a valid claim to some portion of the business, it is important to negotiate from a common understanding of the value of the business. A professional business valuation can provide you both with a comprehensive understanding of this value, which can greatly simplify the matter.

If you have other assets available, you may be able to offer your spouse these other assets to compensate them fairly and close out the divorce process. In the absence of other assets, you may consider using a structured payment plan to pay your spouse their portion of the value over time.

Protecting your rights and interests is always difficult in a divorce, and without proper precautions, you may suffer many unnecessary losses in a time that is already difficult. Be sure to keep your rights secure using the tools of the law as you move from one season to the next.