If you think you might be heading towards a divorce, you need to understand the implications for your ownership stake in a business. A Michigan divorce court treats a business interest like any other asset that is potentially subject to division between the spouses. Depending on the facts, the court could award your spouse part ownership, which could have an impact on your partners, investors and clients. To shield your business interests during divorce, you need to take certain legal steps ahead of time. At Dawson Family Law, PLLC in Sterling Heights, I have been litigating complex divorces for more than 40 years. I provide trustworthy advice to protect my clients’ business ownership rights.
You already know that incorporating your business or setting it up as a limited liability company protects your personal assets from business creditors and other liabilities. But does your company’s legal status protect your ownership stake from asset division during divorce? The fact that you are a corporate shareholder or LLC member is a factor in your favor but it is far from conclusive. Other factors a court might consider are:
Based on analysis of these factors and others, such as your spouse’s direct or indirect participation in the business, all or part of your ownership stake may be considered marital property that is subject to asset division during divorce.
Any participation by your spouse in your business can lead the court to conclude that he or she has earned an equity interest. If your spouse works in the business or otherwise plays a role in its operation, make sure you allocate payments to him or her in a business capacity, such as by:
Clear, accurate record-keeping is essential for documenting a pattern of behavior that establishes your sole ownership.
For businesses started prior to marriage, you can solidify your case for separate ownership by executing a prenuptial agreement. As part of that agreement, you can stipulate that your business should be treated as separate property in the event of a divorce. If you don’t have a prenup, it’s possible to execute a postnuptial agreement under certain circumstances.
Dawson Family Law, PLLC helps divorce clients throughout the greater Detroit area protect their business assets. For a free initial consultation to discuss the process and your options, please call 833-671-4445 or contact me online. My office is conveniently located one-half mile south of M-59 (Hall Road) in Sterling Heights.