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Is your business at risk during divorce?

While ending a marriage is certainly an emotional process, it is important to remember that it is also a legal process. This means that, as a business owner, you have more than just your feelings on the line. The integrity and survival of your business could be on the line during divorce. 

One of the most important things to determine is whether your business is a marital or separate asset. In Minnesota, divorcing couples must divide all marital assets equitably. This means that you do not have to divide your marital assets equally. Instead, you just need to split them fairly. 

Is my business a marital asset? 

This is a complicated question as there are many factors that may influence whether your business is a marital asset. Since it can be a challenge, determining your business’ status as either a marital or separate asset should be one of your top priorities. Here are just a few things you may consider during this process: 

  • When you started your business. If it was prior to your marriage, it may be considered separate property. 
  • If your spouse played a role in the business. If he or she played a vital role, it may be considered marital property regardless of when you started it. 
  • If you have a prenuptial or postnuptial agreement. Your agreement might clearly state whether your business is marital or separate property no matter when it was started or who was involved in its success. 

Demonstrating that your business is your own separate asset often requires proof. Keeping documents about when you started your business, payroll and other important business matters can be essential to this part of the process. 

Why does it matter? 

When you divorce you will go through a process called property division. This is when you and your soon-to-be ex-spouse will divide your marital assets. Separate assets are not included in this process, which is why determining that your business is your separate property might be an essential step in the process. 

All is not lost if your business turns out to be a marital asset. You and your ex might be able to still run a business together, or you may be able to buy out his or her portion of the business. However, before you can decide what to do with your business during a divorce, you do need to determine whether it is a marital or separate asset and the implications of such.