Dividing a Business Interest During a Divorce

  • 19 Jun 2019

In a Maryland divorce, your marital business is handled according to a theory of equitable division. That means a judge considers various aspects, such as your respective contributions to the business, in order to make a fair split. This is opposed to some states, including Texas, California and Wisconsin, that would instead divide property 50/50.

There are many things that could have an effect regarding dividing up your company besides your individual contributions. Please read on for a brief discussion of various scenarios and important concepts that could be relevant to your case. This is not specific legal advice. In fact, this general information should show the diversity of divorce options and the value of individual analysis of each case.

Defining Marital Property

There are some general rules that could apply to business interests during the asset division process of divorce. For example, the court could consider whether value was added before or after the marriage. Additionally, you might want to demonstrate the source of the funds and labor used to maintain the business, as this could have an effect on what portion of the assets the court would consider to be marital property.

Redefining Ownership

Although it is not necessarily the norm, you could potentially re-enter the business as partners with your ex. This could be a good option if you both:

  • Owned well-defined shares of the company
  • Performed essential roles in its operation
  • Were able to maintain separation between your personal and professional lives

Essentially, you could re-define the ownership terms of your business interest with a new partnership contract. You could also take this opportunity to convert your business to a different legal status and ownership structure, using some or all of the data from the divorce discovery process to inform your decision.

Dealing with Use and Possessions Orders

Maryland use and possession orders are court-issued documents that could allow the custodial parent in your divorce to use personal and real property for the benefit of your family — even if one person owned the property outright. These orders should allow your children to have some continuity in their lives. They should not have a deleterious effect on a business.

These interests could come into conflict if your business depends on expensive equipment stored in your primary residence and used by your family. For example, you may use one of your vehicles primarily to transport clients for a real estate practice. Exempting items from a use and possession order may require you to show you hold the title for the property and that the item in question is not used primarily for family purposes.

Taking a Holistic View

Your business probably represents a major investment. It may be your largest asset or your greatest liability. Make sure you do everything you can to make sure everyone gets what they deserve by calling the Law Offices of Sandra Guzman-Salvado at (301) 340-1911 to schedule your consultation.

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