Owning a business often means that you face unique challenges. When one of these challenges involves your marriage, the line between your professional life and personal life may blur. Protecting your business and personal finances is critical if you are getting divorced.
If you are concerned that your spouse may claim a portion of your business, it is important to understand how the law works. During the property division stage of divorce, courts use several factors to determine the outcome. One key factor is the classification of property.
Who really owns the business?
Even if you consider the business yours, it might not be yours alone in the eyes of the law. What matters is how the court classifies your business: whether it is separate property or marital property. The court only divides marital property in Ohio, whereas separate property is excluded from divorce rulings.
A business may qualify as separate property in a few different circumstances, such as:
- You inherited your business interests.
- You received the business interests as a gift.
- You started or purchased the business before marriage with your personal funds.
- You used separate property to acquire the business, which also applies when starting a business during the marriage.
- Your prenuptial or postnuptial agreement already specifies separate ownership of business interests.
However, many family businesses count as marital property. For example, using marital funds to start a business typically means that both spouses technically own it. Therefore, each spouse could close the divorce with a portion of the business to either sell or maintain. It is common for spouses to negotiate what to do with their business interests in this situation.
Businesses evolve over time, and you may have used some marital resources for business purposes along the way. Due to the intricate nature of cash flow and personal income, business owners may quickly find themselves with a complicated divorce case. For this reason, professional legal insight can be valuable.