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Property division: What will happen to my business in a divorce?

More and more people are quitting corporate America and becoming their own bosses. While this may seem like the dream life for many Maryland residents, starting a business can be a risky venture. With no regular paycheck to count on, many entrepreneurs work 80-hour weeks and make many sacrifices to keep their businesses afloat. So when their marriages fail, these entrepreneurs may worry about what will become of their business, especially if it is profitable. Will they have to split it 50/50 and have their ex-spouse as a business partner for eternity?

Unfortunately, there is no one-size-fits-all answer to this question when property division is involved. For the most part, anything acquired before the marriage is considered separate property. However, a business started before the marriage may be sustained by the marriage and therefore be considered marital property.

Some examples of this would be if the other spouse uses his or her money to pay bills or purchase items for the business or even works for the business as an employee in some aspect. This is called using commingled funds and could turn the business into marital property.

Even if the business was not funded by the other spouse, running a business is a sacrifice that both spouses often have to share. This means that no matter what, an entrepreneur should expect to give up some of the business assets in a divorce.

Maryland follows equitable distribution rules in a divorce, which means that the judge will split all assets based on what is fair. This may not be 50/50; when a business is concerned, the spouse who started the company may get 90 percent, with the other spouse receiving 10 percent.

Ideally, a business owner would be prepared for the reality of divorce when deciding to get married. By drafting a prenuptial agreement or other type of legal document, entrepreneurs can protect their investment. Those dealing with this divorce issue or those seeking to draft marital documents should gain legal guidance about the process and what steps they could take to better their situation.

Source: FindLaw, "Divorce Property Division FAQ," accessed Nov. 29, 2014

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http://www.mckeonlawfirm.com 202-742-1800 The McKeon Law Firm handles marital property issues in divorce. The attorneys are experienced in business valuation & tracing assets. Contact us in Gaithersburg, Maryland for property division matters.

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