What Happens to A Business During a Divorce?

Going through a divorce or a dissolution can be a traumatic time, no matter how amicable it may be. Likewise, businesses can be equally complicated to sort out during a divorce, which gives way to an important question. Will my business be part of the divorce settlement?

What is a matrimonial asset?

Consider an asset acquired by either spouse or both, before or during the course of a marriage. If it is used in their shared interests, is considered to be a matrimonial asset.

Also referred to as ‘matrimonial property’, examples of this might include:

  • A house which is owned by one spouse before the marriage, but then used as the family home becomes a marital asset.
  • Cash inherited by one spouse from a relative will become a shared, and therefore matrimonial, asset if it’s mixed in with the matrimonial funds. If it is used to make a shared purchase, like a house or a car, then those items will become a marriage asset.

Is a business considered to be marital property?

A business is considered to be an asset, because it is a financial resource. Hopefully, things have been going well, and your business is a source of income!

As a result, it means that businesses are often likely to be considered matrimonial assets during divorce proceedings.

Examples of when your business might be considered to be a marital asset:

  • You started your own business, and then met and married your partner. They invested in the growth of your company, such as buying new equipment or paying marketing costs. This means that both spouses have contributed to the business’ performance.
  • You started your own business, with a business partner, and then met and married your spouse. You had children, but sharing childcare duties was restricting the amount of time you could dedicate to your business. Your spouse agreed to leave their own career in order to take over full-time childcare, so that you could concentrate on your business. In this respect, the court might decide that your spouse has taken action which significantly contributes to the success of the business in question.
  • You started the business together, though one spouse later took a less active role in the business.

Who decides if my business is a matrimonial asset?

Business cases are usually processed through a commercial court. However, it’s the family court which handles divorce cases, and this includes the division of assets.

The financial disclosures will be assessed, with the outcome of those investigations considered alongside other contributions.

In some cases, you might be able to demonstrate that your business is totally without the influence of your spouse. That is, the fact that you own it, or your ability to operate it successfully, has had no input from them. If that’s the case, then it may be classed a non-marital asset.

How is a business divided in a divorce?

To be fair, family court does its best to find the best, most reasonable outcome for all involved. This might mean that, rather than the business being carved up between those involved, another solution will be found.

If the business is considered to be matrimonial property, then it will need to be valued so that financial settlement can be calculated. The extent to which the settlement can impact the future of your business can vary!

Is this something that you have experienced, or have knowledge of? Let us know in the comments.

Elizabeth Hughes

A content writer specialising in business, finance, software, and beyond. I'm a wordsmith with a penchant for puns and making complex subjects accessible.

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