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Divorce and the family business

On Behalf of | Apr 13, 2023 | Firm News |

When a married couple divorces in Virginia, they must divide their marital property in a way that meets standards of fairness under state law. Generally, marital property includes every asset the couple acquired during the marriage.

Assets either spouse acquired before the marriage are generally considered separate property, and therefore not subject to division in divorce. However, it’s common for separate property to become commingled with marital property, or for the other spouse to gain a legal property interest in the other spouse’s separate property, especially in marriages of long duration.

Many spouses must deal with this issue in the property division phase of their divorce. In some cases, they can resolve it with some relatively straightforward negotiation. But depending on the type of asset involved, this negotiation can be much more complicated.

For instance, it can be very tricky to divide ownership of a business in a divorce.

Separate or marital property?

The first question is whether the business is separate or marital property. If the couple bought the business together during the marriage, it is almost certainly marital property. However, it’s important to remember that even if one spouse bought the business in their name only during the marriage, it may be considered marital property. This is especially true if the money used to pay for the business came out of the couple’s marital property.

If one spouse owned the business before the marriage, it may be considered separate property. However, if the other spouse contributed to the business during the marriage, they may have gained a property interest in it.

Three options

If you have determined that the business is partly or wholly marital property, then there are generally three options:

  • Continue to co-own the business with your soon-to-be ex-spouse
  • Sell the business and divide the proceeds according to the terms of your divorce settlement
  • One spouse buys out the other’s share

Most business owners prefer the third of these options. However, the third presents a challenge: How do you know how much the business is worth? Only by answering that question can you arrive at a fair price.

To do this, many divorcing business owners hire valuation professionals to set a price for the business. This is challenging work, but both spouses in such a situation can find it valuable.


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