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What might happen to a business during a divorce

On Behalf of | Jan 30, 2015 | High Asset Divorce |

When going through a divorce in Pennsylvania, spouses may disagree about issues like child custody, property division or alimony. Property division can be especially confusing when a business is involved because couples may run a business together or not know how to split a profitable company.

Pennsylvania is an equal distribution state, so both parties are entitled to a fair though not necessarily equal amount of martial property. This applies to businesses even if one partner had no part in the business or did not work, and a judge would likely look at this partner’s other contributions to a marriage like raising children when fairly dividing property.

Property acquired before a divorce or through an inheritance is not part of martial property and not subject to division, but businesses started during a marriage are considered martial property unless a couple signed a prenuptial agreement. Additionally, a spouse may still be entitled to a portion of a business even if the other partner started it before the marriage if the business increased in value during the marriage.

Since one partner may not wish to sell a business, a couple might work out a financial agreement that involves alimony, a buyout or swapping assets. This agreement would give a spouse value equal to what his or her share of a business is worth. These options are also possible when spouses run a business together, but ex-spouses might also choose to continue to work together.

Coming to an agreement about asset division is especially important during a divorce where a business is involved because the distribution arrangement could harm one’s livelihood. To ensure an equitable distribution, a business must be valued accurately. Additionally, a settlement agreement must clearly state what each spouse receives to avoid future disputes. To learn more information, please visit our page on dividing a business during a divorce.