What happens to a family-owned business after a divorce?

by | Jun 15, 2022 | Divorce

Separating your assets during a divorce is complex if you have an asset like a family-owned business.

Your stake in the business might end with the divorce, but that depends on a few important factors.

When you created the business

In Massachusetts, if you start a business during your marriage, your business counts as marital property even if your spouse takes no part in it. If you started a business before you got married, you might have some protections.

If you have written agreements

Prenuptial agreements help protect the assets that spouses bring into a marriage. A prenup can ensure you get the premarital value of your business after a divorce. If you do not have a prenup or if you create a business during your marriage, you can set up a postnuptial agreement. They function the same way as prenups and can help you decide how to split the business and other marital property after the marriage ends.

Who buys out the other

Equity, not equality, determines asset separation in Massachusetts divorces. This means that you must split the value of the business with your ex. If you want to keep your business, you can buy out your ex with the cash value or other assets. If all else fails, you can sell your business to your ex, or you can sell to a third party and divide the profit. You can always continue to share your business, but you will need to establish written agreements moving forward.

You can protect some of your business interests if you are proactive, but when you divorce, you will have to negotiate how you will split your business with your ex.