Is my spouse entitled to my business when we get divorced?

The answer is , it depends. Distribution of an asset, such as a business depends on what if any contributions the other spouse made towards the business. These contributions are broken down into two different categories; direct and indirect contributions.

A direct contribution is where the spouse worked in the business. For example, the spouse is an employee of the company. But, it could also include a spouse who handled an administrative function, even if not directly an employee.

A indirect contribution is where the person did not do something specific to help the business run, but as your "economic partner" helped or enabled you to develop and grow your business. The most common example is a housewife who stayed ohm and cared for the children and the home, so that you could be out growing your business.

Active contributions tend to receive a higher percentage of the business during the divorce than indirect contributions. Percentages awarded to the non-titled spouse typically range from 50% to 25% to 0%.

Parties often utilize the services of a forensic accountant to determinate value of the business. This is similar, but not to be confused with determining the value of a spouse's enhanced earnings or income.

Where one spouse has a business, it may be good to speak with an attorney about protecting this asset should your marriage break down. (See my blog on "What type of Agreement do you need?") Contact our office to learn more about how to protect this precious asset, your business.