Divorce in Georgia involves handling many different issues, including child custody, child support, spousal support and property division. If you own a business, determining what happens to the business is part of the property division process.
This can understandably cause you significant stress and worry. Like many business owners, you have probably worked hard and sacrificed a lot to start and grow your business. The thought of losing it to your spouse can be heartbreaking.
Even if you keep your business, you may worry that the financial strain caused by your divorce will ultimately cause your business to go under.
Your business is likely considered marital property, regardless of how it is structured. Whether you own a sole proprietorship, partnership, LLC or corporation, your business will be considered marital property.
Marital and separate property
Marital property is generally assets that were acquired during the marriage, appreciated in value during the marriage or separate assets that mixed with marital assets.
When it comes to a business, this means that even a business that you owned prior to marriage could now be a marital asset if the value of the business increased while you were married.
Additionally, your business could become a marital asset through mixing or “comingling” from something as simple as using business profits to take a vacation with your spouse or put a down payment on a house.
Although it is not impossible for a business to be a separate asset in a divorce, it is probably best to prepare as though it will be a marital asset subject to division.
Equitable distribution
Georgia is an equitable distribution state. This means that marital assets are divided equitably, or fairly. This does not always mean equally, although an equal split is usually assumed to be fair.
Dividing your business does not mean giving half of it to your spouse. In fact, courts often try to avoid that outcome since former spouses trying to run a business together is usually not a good idea.
This is not a legal requirement. If you and your spouse traditionally ran the business together, you may keep doing so after you are divorced. However, you should think carefully about whether this is in your best interest before agreeing to it.
Otherwise, it is common for one spouse to keep the business. Although the business is technically available to either spouse because it is a marital asset, a court generally awards it to the spouse who had greater roles and responsibilities in running the business.
Remember that the overall goal is to achieve an equitable result. When one spouse keeps a business, this can be done by giving the other spouse another valuable marital asset, such as a home or by buying out your spouse’s share of the business.
Valuing the business
Before you decide how to divide the business, you must determine the value of the business. You and your spouse must agree on an appraiser and a valuation method.
You can both agree to use the same appraiser or each get your own and compare numbers. This process can get complex and requires careful analysis and ultimately negotiation. It is best to not go through this process on your own to ensure your business is protected.