Maybe a spouse started a small business before they married or maybe it was something they and their spouse started together while wed. After a time, the business flourished into a profitable enterprise. Given its success, it might be the most valuable asset they own and is the source of their livelihood.
Still, many marriages do not last. If divorce is looming and a spouse wants to continue running their business following their divorce, they likely want to know if their spouse will get an ownership share in the enterprise following their split.
Separate property versus marital property
A closely-held business is considered property, just like a house or an automobile. As such, each spouse might have an ownership right to it if they divorce, depending on whether the business is separate property or marital property.
In Georgia, separate property is that which was acquired before marriage. It remains that of the spouse who acquired it.
Marital property is that which was acquired during the marriage. It is split equitably between the spouses in the property division process in a divorce. This may be an equal split, but it may be an uneven split if fairness dictates so.
So, who gets to keep the business?
So, if a spouse started their closely-held business on their own prior to marriage it might be considered separate property. If so, the other spouse might not be awarded a share of it in a divorce.
But rarely are things so straightforward. First, if both spouses started the business together while married, both spouses might have an ownership interest in it.
Even if a spouse started their business while married, and the other spouse had nothing to do with its formation or operation, the business might still be considered marital property if it was purchased, formed or maintained using joint funds.
No matter when the business was formed, if the other spouse contributed either money or efforts towards the running of the business or towards the growth of the business, the business might be considered marital property. In this case, both spouses might have an ownership interest in the closely-held business.
As this shows, who gets an ownership share in a small business following a divorce is a complex topic. Complex property division cases like this are decided on a case-by-case basis, and the decision will be highly specific to the spouses’ unique situation.