Does my spouse have an interest in a business I started prior to marriage?

| Nov 20, 2020 | Firm News

Dividing assets during a divorce is often one of the most contentious parts of the process. Connecticut divorce laws call for the couple to divide the marital assets fairly and equitably, which is not the same as half and half. This would include a business that a spouse started during the marriage. A business that started before the marriage may also contain a marital property component.

Changes to the business make it a marital asset

Unless the couple drafts a prenuptial or postnuptial agreement regarding the business, there may be instances where the formerly individual asset becomes a marital asset. These include:

  • The business owner commingled marital funds or used them to support the business.
  • The business owner did not draw an appropriate salary and thus was virtually supported by marriage.
  • The business was converted into a corporation during the marriage.
  • The non-owner spouse notably contributed to the success of the business during the marriage.
  • It could be a situation where the non-owner handled all the home affairs while the business owner focused on the company.

Valuing a business

In determining the business’s status (marital or separate), it will be necessary to assign a value to the company, perhaps using business valuation experts. The two sides may hire a single valuation expert, but they will often not agree on the value of a business, which can add significant complexity to the divorce agreement.

It is always best to protect marital rights

It is often best for couples with complex estates to work with family law attorneys with experience working with business owners. These legal professionals can analyze the details of the divorce and help determine whether a business qualifies as a marital asset. If the two sides disagree, it may be in their best interest to litigate the divorce to hold onto the company or get a fair settlement.