When a couple divorces, they divide the various assets that were acquired during the course of the marriage. This process can be complicated for couples who share a business.
Property owned and/or acquired by one or both spouses is accounted for when a couple initiates the divorce process. From there, it is designated as separate or marital property. Marital property is all property acquired by spouses during the marriage, regardless of whose name is on the title. These assets may be subject to equitable distribution.
When a business is at stake, that business must be valued, just like real estate, financial accounts, and other types of assets would. A third-party, qualified appraiser typically is brought in to value the business.
This appraiser considers different variable to calculate the value of a business, such as:
- Tangible assets: Product inventory, equipment, and supplies.
- Intangible assets: How consumers and the industry view the business, their reputation, and “goodwill.”
- Liabilities: Rent, loans, credit lines, and other ongoing expenses.
Next, it is determined how these assets will be distributed in the split. Some couples collaborate on these decisions with the assistance of a third-party mediator. If mediation is unsuccessful, the courts will decide how assets are divided.
Is a Business Marital Property?
A business can be considered marital property. When a couple owns a business, the courts look at when the business started, who runs the business on a daily basis, and how each spouse contributes to the business.
In many cases, a business started by one or both spouses in the marriage is considered marital property and is subject to distribution. The same may be true even if the business was created by one spouse but the other spouse joined the business and contributed to it after the marriage.
Equitable Distribution in Pennsylvania Divorces
Pennsylvania is an equitable distribution state. This means marital assets and debts are divided according to the principle of equity. Instead of splitting assets equally, the goal is to distribute assets and debts fairly and equitably.
The courts consider several factors to decide equitable distribution, including:
- Marriage length.
- Both parties income.
- Both parties age and health.
- Pre-or post-nuptial agreements.
- Standard of living during the marriage.
First and foremost, the courts will enforce the terms of any prenuptial or postnuptial agreement regarding a shared business. If no such agreement exists, a few things can happen.
The court may award the business to the spouse who ran it, but give the other spouse other marital assets to compensate them fairly. If both parties worked to build and sustain the business, they may each receive half its value.
The future of a shared business varies from case to case. For more personalized legal guidance, contact a divorce lawyer to discuss your situation.
Chester County Divorce Lawyers at Eckell Sparks Resolve Complex Family Law Matters Involving Businesses
If you are going through a divorce and have a shared business, speak with our Chester County divorce lawyers at Eckell, Sparks, Levy, Auerbach, Monte, Sloane, Matthews & Auslander, P.C. We can protect your interests during every stage of the divorce process. Call us at 610-565-3701 or contact us online to schedule a consultation. Located in Media and West Chester, Pennsylvania, we serve clients in Delaware County, Chester County, and Montgomery County.