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Is your business considered marital or separate property?

On Behalf of | Jul 20, 2023 | Marital Property Division

Whether a business is considered marital or separate property can significantly impact its division during asset distribution in a divorce. However, the specific rules governing this classification can vary, depending on the circumstances surrounding the business’ acquisition and management.

Marital property is generally split between the divorcing couple, while separate property is not subject to division during divorce proceedings. Here is what you need to know.

Was the business started before or during the marriage?

Generally, if a business was established or acquired during the marriage, it is typically considered marital property. This means that both spouses may have a claim to a portion of the business’s value.  

The contribution of each spouse to the business and the source of funds used to establish or grow the business are some factors that can influence how the business is ultimately divided.

However, if the business was a gift, inheritance or established before the marriage, it may be classified as separate property — although your spouse may have gained some interest if they participated in it over the course of your marriage and helped it grow. This can happen if the spouses jointly operate the business or if separate and marital funds are mixed.

What are your options?

If the business is considered marital property and is subject to division, you do not have to sell it and divide the proceeds. You may buy out your spouse’s share or stake in the business or continue operating the business as joint owners.

Ultimately, the classification of a business as marital or separate property is a complex matter that requires careful consideration of various legal factors. Seeking the necessary guidance and ensuring proper documentation can help protect your interests and ensure a fair and equitable distribution of assets during divorce proceedings.