As a business owner, you know how difficult it is to start and maintain a business. Long hours and significant financial investments make your business one of the most valuable things you own. If you are getting a divorce, it is important to take the necessary steps to protect your business to ensure that your years of hard work do not go to waste.
Is your business marital property?
Marital property is typically defined as an asset acquired during your marriage. However, a business you started before you got married can still be considered marital property if:
- Your spouse contributed to the business throughout the course of your marriage.
- Marital funds were used towards the business.
- The value of the business interest increased during your marriage.
If the court determines that your business, in part or entirely, is marital property, it may be divided between you and your ex in the divorce.
Dividing the business ‘equitably’ in Colorado
Colorado is an ‘equitable distribution’ state., meaning that your marital assets will be divided ‘fairly and equitably’ rather than ’50-50.’ However, how to divide a business equitably can be challenging and depend on many factors. Courts will consider:
- The value of the business – Courts will first need to determine the value of the business. There are many ways to value a business in the state of Colorado, including an asset-based valuation, income-based valuation, and market-based valuation. You and your ex can choose to have a single valuation done by one financial expert, or you each can find an expert to conduct separate valuations.
- Contributions – The courts will look at what each spouse contributed to the business and the role each spouse played in the growth of the business.
- Ability to maintain – If both spouses own part of the business, the courts will look at who would be best suited to maintain the business.
- Financial status – The court will consider each spouse’s financial circumstances, including income and earning ability.
- Child custody/spousal support – The income from the business may affect child custody/spousal support.
No matter how well you get along with your ex, many complex issues can arise when you are trying to divide up your assets, particularly your business. A divorce attorney can assist you with property division issues and ensure that your rights are protected throughout the process.