You’ve poured your heart, soul, and countless hours into building your business. It’s more than just a job; it’s a part of your identity, your legacy, and your financial security. Now, as you face a divorce, the thought of your business becoming a battleground is terrifying. Will you have to sell it? Will your spouse become a co-owner?
How can you protect the company you’ve worked so hard to create? These are valid and stressful questions. For a business owner, divorce is not just a personal crisis; it’s a potential business crisis. The good news is that with careful planning and the right legal strategy, you can protect your business and navigate your divorce without sacrificing everything you’ve built.
Is Your Business Considered Marital Property?
The first and most critical question is whether your business is considered marital property, separate property, or a combination of both. In Virginia, marital property is generally defined as any asset acquired or value created during the marriage. According to Virginia Code § 20-107.3, even if you started the business before you got married (making it separate property), any increase in the business’s value during the marriage due to the contributions of either spouse (monetary or non-monetary) can be considered marital property.
This is a complex area of law, and determining the marital portion of your business requires a thorough analysis by an experienced family law attorney and often a business valuation expert.
The Business Valuation Process: What to Expect
If your business is determined to have a marital component, it will need to be valued. This is often one of the most contentious parts of a divorce for business owners. Here’s a simplified overview of how it works.
| Aspect | What It Means |
|---|---|
| Hiring a Valuation Expert | A neutral, third-party business appraiser is often hired to determine the fair market value of the business. Both spouses may hire their own experts, especially in high-conflict cases. |
| Valuation Methods | Experts use various methods to value a business, including the asset-based approach, the market-based approach, and the income-based approach. The appropriate method depends on the type of business. |
| Reviewing the Report | The valuation expert will produce a detailed report explaining their findings. Your attorney will review this report with you to ensure it is accurate and fair. |
Three Options for Dividing the Business
Once the business has been valued, you and your spouse will need to decide how to divide the marital portion. There are generally three main options.
1. One Spouse Buys Out the Other.
This is often the most desirable option for the business-owner spouse. In this scenario, you would keep the business and pay your spouse their share of the marital value. This payment can be made in a lump sum, through a structured payout over time, or by trading other marital assets (like equity in the marital home or retirement accounts).
2. Co-Ownership.
In some rare cases, spouses may decide to continue co-owning the business after the divorce. This is only advisable if you and your ex have an exceptionally amicable relationship and can work together effectively as business partners. This option is fraught with potential conflict and is generally not recommended.
3. Sell the Business.
If a buyout is not financially feasible and co-ownership is not an option, you may need to sell the business and divide the proceeds. This is often a last resort, as it means giving up the business you’ve worked so hard to build. An experienced attorney can help you explore all other options before resorting to a sale.
Our compassionate legal team understands the unique challenges faced by business owners and can help you find creative solutions.
Protecting Your Business Is Protecting Your Future
Your business is not just another asset; it’s your livelihood and your passion. Protecting it during your divorce requires a proactive and strategic approach. Don’t wait until it’s too late. The sooner you consult with an attorney who has experience in high-asset divorces and business valuation, the better your chances of achieving a favorable outcome.
If you’re a business owner in Fairfax facing a divorce, we’re here to help you protect what you’ve built. Contact us or call our Fairfax Divorce Lawyer Now at 703-223-5295 to schedule a confidential consultation.
Frequently Asked Questions (Q&A)
Q: My spouse never worked in the business. Are they still entitled to a share?
A: Yes, potentially. Virginia law recognizes non-monetary contributions to the marriage. If your spouse was a stay-at-home parent, managed the household, or supported your career in other ways, their contributions may have allowed you to grow the business. This can give them a claim to a portion of the business’s marital value.
Q: What is a prenuptial or postnuptial agreement, and can it protect my business?
A: A prenuptial or postnuptial agreement is a contract that can define how assets, including a business, will be treated in the event of a divorce. Having a well-drafted agreement is one of the most effective ways to protect your business. If you don’t have one, it’s important to work with an attorney to navigate the division of your business assets.
Q: How can I afford to buy out my spouse’s share of the business?
A: There are several ways to structure a buyout. You can use other marital assets, such as retirement accounts or real estate, to offset the value. You can also negotiate a structured payout over several years, or secure a loan to pay your spouse their share. A skilled attorney and financial advisor can help you explore all your options.
For more information, visit our business owner divorce page or check our FAQ page.