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How can a couple address a small business during divorce?

On Behalf of | Nov 20, 2023 | Family Law |

Property division matters are a challenge in virtually all Pennsylvania divorces. However, couples with more valuable property often find the process more difficult to manage. Many couples share real property or vehicles, as well as financial accounts and retirement savings, all of which must be addressed during the property division process.

Sometimes, the marital estate for a couple in Pennsylvania includes an ownership interest in a business or professional practice. The company will likely be one of the biggest sources of contention during a divorce because of how valuable it is and its ability to generate future income.

It may be subject to equitable division

The law in Pennsylvania requires an equitable or fair distribution of marital property. Judges look at factors including the income and separate property of each spouse, the health of the spouses and the length of the marriage to decide what would be a fair way to divide marital property.

A business that someone started during marriage or invested marital resources in will likely be subject to division. Spouses will have to determine what the company is worth by conducting a business valuation. They will then need to establish how much of that value is marital and how much would be the separate property of one spouse.

Then, they would need to decide how to share that value appropriately. Sometimes, spouses can use other assets to balance out the value of a business. Other times, one spouse may need to liquidate some of the equity in the organization to pay the other their fair share. If the matter goes to court, it is impossible to predict exactly how a judge will address the business.

Many business owners want to settle

Those who have invested years of work and thousands of dollars in the development of a company do not want to sacrifice their efforts based on the whims of a judge. They will therefore often propose specific terms to their spouses during divorce so that they can have control over the outcome of property division proceedings.

Spouses are frequently able to negotiate and arrangement that both agree is fair and that will not detract from the company or professional practice. Couples may attend mediation as a way of negotiating a property division settlement that they both agree is fair. Couples who reach their own agreement can control the terms of property division. Otherwise, the ownership of the business could be at risk during divorce proceedings.

Understanding what may happen to a business during a Pennsylvania divorce can help people choose the best solution given their circumstances. Seeking legal guidance before committing to a particular approach is generally wise.

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