Business ownership can complicate a divorce, particularly when one spouse claims part ownership of a closely-held business interest. If one spouse owned the business prior to the marriage, then it is possible that the court will consider the value of the business to be separate property and, therefore, not subject to division between the parties in the divorce. However, if a business was acquired or established during the marriage, its value may be considered as marital property regardless of whether it is only owned by one spouse and will be subject to division between the parties based on the law for marital property in the state. Additionally, even if the business was acquired before the marriage, the appreciation in its value may be considered marital property and may be subject to division in a divorce. This “creation of marital value” will also apply to joint funds used to expand or invest in the business, or the spouse’s contributions to the business, if those contributions helped in the operation or the growth of the business.
Equitable Division of Value of Business Interest
Under Ohio law, the value of a business interest acquired during the marriage is marital property and is subject to an equitable distribution analysis (unless the value was acquired with separate or pre-marital funds). Generally, one spouse may be entitled to receive 50 percent of the value of the business unless a court deems an equal division to be inequitable or unfair. When marital funds or effort are used both spouses are considered to have contributed equally to marital property that is produced or acquired by either one of them during the marriage. The fact that the business interest is only in one spouse’s name is not the deciding factor this analysis.
Co-Ownership, Buyout, or Sale
It is important for parties to remember that, although one spouse may be entitled to half the value of the other spouse’s business interest, this does not necessarily mean half of the business itself. Co-ownership is certainly an option, if both spouses remain amicable and decide to continue the business together (or even if the court orders that, regardless of how they get along). However, if the divorce was not amicable, this may not be feasible.
Another option may be that that one spouse buys out the other spouse’s interest, which may be the best option depending on whether there are sufficient assets to complete the transaction. The last option is to sell the business interest and divide the proceeds of the sale.
Columbus Family Law Attorney
Business interests can complicate a divorce. Contact the Law Offices of William L. Geary at (614) 289-1227 to speak to an attorney who can help you make decisions that are best for your situation.