As a business owner, the success and protection of your business is crucial. If you are entering the process of a divorce, the well-being of your business can be a significant part of the proceedings. There are steps you can take to protect your business and financial future, but this can be overwhelming to manage alone. A Kansas City, Kansas, divorce attorney is an essential asset when navigating these complicated legal proceedings.
Property Division in Kansas City, KS
In Kansas, the law does not differentiate between separate and marital property when a couple divorces. All property is marital and potentially up for division. These assets are divided under equitable distribution laws. Although the court frequently gives back separate property to the initial owners, there is no certainty that this will occur. Your business will always be considered marital property in a Kansas divorce, even if you established it before your marriage.
If the business is considered separate property prior to divorce, it could remain intact and under the ownership of one spouse. The business still must be evaluated to ensure that the other spouse receives a fair portion of marital assets. However, the business is up for potential division, just like all other assets, and the court has the discretion to determine how that happens.
This is why it is beneficial for business owners to manage their divorce outside of court. By negotiating a separation agreement with their spouse, business owners have more control over the outcome of what happens to the business.
There are many different circumstances that can affect these proceedings. Spouses may co-own a business, or one spouse may have sole ownership or interest. Each spouse may have different intentions for how they can benefit from the business or if they want the business to remain intact. Negotiating these issues can allow spouses to reach a favorable conclusion.
How You Can Manage Your Business During Property Division
There are several ways that spouses can negotiate a fair and reasonable division of property that supports their financial interests and personal wishes. Some of the available options include:
- A buyout of the other spouse’s ownership or interest in the business, especially if only one spouse has an interest in maintaining the business
- Selling the business and equitably splitting the profits between spouses if neither spouse wishes to maintain the company
- Providing one spouse with a paycheck for their portion of the business’s interests to ensure that the issue of future profits is handled
- Spouses continue to co-own a business together
Advanced Planning for Business Protection
While there are solutions for this issue during a divorce, some of the ideal resolutions include preemptive protection. There are ways that you and your spouse can protect each of your financial well-being and the longevity of the business from the beginning. Some of these options include:
- Marital Agreements: Prenuptial and postnuptial agreements are contracts made by fiancés or spouses to determine each person’s rights and responsibilities to property and debts during their marriage and after divorce. This may include listing a business as separate property or determining a different way to split business ownership or benefits in a divorce. When creating a marital agreement, spouses should have legal support to ensure that the agreement is fair and enforceable.
- Operating or Shareholder Agreements: These agreements can outline ownership terms, including how to handle the divorce of business owners. It can keep a business running while ensuring proper compensation.
- Limiting Involvement: By keeping your spouse from being involved in the business, you may limit the likelihood of the business being considered marital property. This will not always be applicable.
An attorney can help you navigate these potential solutions and determine which is right for your circumstances.
FAQs
Q: Can My Ex-Wife Come After My Business?
A: Whether an ex-wife can go after a business relies on many factors. If the divorce is already finalized, then the division of property cannot be changed by the court. However, an increase in your financial assets from a business could mean that an ex-spouse should be receiving greater support or that you do not need as much financial support from your spouse.
If the divorce is still ongoing, a spouse may or may not be able to claim your business, particularly when it is considered marital property.
Q: Should You Start a Business While Going Through a Divorce?
A: It may not be a good idea to start a business while going through a divorce. It can result in the business being part of the asset division if you use any marital assets to invest in it or when you and your spouse were not separated at the time. Even if the business is a separate asset, it can create a very complex financial situation for all parties, complicating the case. Talk with your divorce attorney about your unique situation.
Q: Am I Responsible for My Husband’s Business Debts If We Divorce?
A: You may or may not be responsible for your husband’s business debts if you divorce. Like assets, debts are divided between spouses if they are considered marital property. If your spouse’s debt was incurred during a marriage, it will likely be marital property, and you may be partially responsible for it. Business debts do not always factor into a divorce. Many companies are created in a way that protects business owners from personal liability, which would also protect you as the spouse. However, if this protection does not apply, you could be responsible.
Q: How Is a Small Business Valued in a Divorce?
A: How a small business is valued in a divorce varies, and professional valuation tends to use several methods to value the same business. The business’s most accurate value is likely a mix of the different calculation methods. To value a business, you may look at the business’s assets, income, debts, and expenses. Businesses often need to be valued whether they are considered marital or separate assets, as both affect the division of property.
Protecting Your Financial Future During a Divorce
No divorce is easy, and it can be even more straining when there is complex property division. When you are getting a divorce as a business owner, it is crucial that you have an attorney protecting your rights and financial interests. Contact Stange Law Firm today.
