Divorce can be a complex and emotional process, especially when significant assets are involved. Business owners’ stakes are even higher as their business interests could be part of the marital estate. Protecting your business during a high-asset divorce is crucial to safeguarding your financial future.
Marital vs. separate property
In Michigan, the difference between marital and separate property plays a critical role in all divorces. Marital property includes assets acquired during the marriage, while separate property typically involves assets owned before marriage or acquired individually through gifts or inheritances. Still, if you founded your business or it grew significantly during the marriage, it might be marital property.
Protecting your business while married
During the marriage, you must maintain clear boundaries between personal and business accounts. Mixing personal and business funds can make it difficult to argue that your business is separate property. Keep track of all transactions to show that your business money is separate from your personal finances.
If possible, limit your spouse’s involvement in the business. A spouse who plays a significant role in the business may have a stronger claim to it during divorce proceedings. Clearly define roles and responsibilities and document any contributions made by either party to the business.
Protecting your business in a divorce
One of the most effective ways to protect your business is through prenuptial or postnuptial agreements. These legal documents can specify that your business is separate property, shielding it from division in case of a divorce. These agreements should be drafted and reviewed by legal professionals to hold up in court.
Without an agreement, an accurate valuation of your business can be helpful. You can hire a qualified appraiser to determine the actual value of your business. This information can help negotiate a fair settlement and may protect some of your business assets.
You can also consider negotiating a buyout if your spouse is entitled to a share of the business. This arrangement allows you to retain full business control while compensating your spouse for their share. You can work with a complex divorce attorney to determine a fair amount.
Legal considerations in Michigan
Under Michigan law, courts divide marital property equitably, though not necessarily equally. They consider factors such as the length of the marriage, contributions to the marital estate, and each party’s financial needs. Courts may award a portion of the business to a spouse, mainly if they contributed to its growth.
Protecting your business in a high-asset divorce requires planning and strategic actions. By seeking professional legal advice, you can safeguard your business interests. Divorce is challenging, but with the right approach, you can emerge ready for the future. If you are facing a divorce, consider consulting with a divorce attorney to explore your options,