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Does my spouse have a claim to ownership of my small business?

On Behalf of | May 13, 2020 | Property Division

Who gets what assets can be one of the most contentious aspects of a divorce. Trying to find a fair way to split up your property can be difficult, especially when you and your ex don’t agree on what is reasonable. Complicated assets, like an ownership interest in a business, can make your impending divorce more complicated.

Many business owners want to protect their company from division or allocation in a divorce, but that isn’t always an option. First, you will need to determine whether your business will be marital property in the eyes of the courts. Then, you will have to find a way to place a reasonable value on your ownership interest in the business.

For many Wisconsin business owners, protecting their small business may become the cornerstone of their divorce strategy.

Is the business marital property?

According to Wisconsin’s marital property laws, any assets and debts you acquire before or during your marriage are marital property unless they were received by a gift or inheritance, or you and your spouse have a prenuptial agreement. Regardless of who earns more money or who is named on an account, anything you acquire during your marriage belongs to both spouses.

With complex assets like a business, it’s possible for you to have formed the business prior to marriage using your separate property. However, if you get married without a prenuptial agreement and invest marital assets in the business during your marriage, your business will be subject to division as marital property.

Putting a fair value on the business

Business valuation requires that you carefully review both the assets and liabilities for the business, as well as its current and prospective future income. Once you know the value of your business, you can then suggest alternatives to sharing that ownership interest in the business through options such as an equalization payment to your spouse from a different asset.

More specifically, perhaps your spouse could retain other assets, like your vacation home, to offset what might be their portion of the business’s worth. You could potentially negotiate favorable terms with your spouse that will protect your business from division and potential financial harm prior to, or during, the divorce process.