If you and your spouse own a business together and are considering divorce in Michigan, you will need to think carefully about how your business will play a role in the process of property division during your divorce. Under Michigan law, any marital assets or debts of a couple getting divorced in the state are divided according to a theory known as “equitable distribution.” What this means is that your property will be divided in such a way that the court deems fair or equitable to both of the spouses. When the parties can come to an agreement about property distribution (a property settlement), the court can sign off on that settlement agreement as long as it is not clearly unfair to one of the parties.
Where does this leave your business? What should you do if you own a business with your spouse? The answers to these questions depend on many factors, including whether you plan to keep your business open or to close it down.
When You are Planning to Stay in Business with Your Spouse
In some situations, divorcing spouses remain on good-or at least working-terms with one another, and they plan to stay in business together even though they will no longer be married. Whether the spouses are in business only with one another, or whether they are in business with other partners or owners, this option of both spouses remaining as owners in the business is typically the easiest in a divorce but not a very common occurance. The business may still need to be valued and “distributed” for purposes of property division, but typically a court will determine each spouse’s stake in the business and distribute property based on the understanding that the spouses are remaining in business together and keeping their company open.
You or Your Spouse Plans to Leave the Business
What about a situation in which one of the spouses wants to keep the business open, but the other spouse wants to leave? The answer to this question depends in part on the type of business structure you have. If you have a partnership, in most cases it will be possible to “buy out” the spouse who wants to leave. The spouse who wants to remain in the business can be responsible for buying out the other spouse, and the court can take into account the assets associated with the business when distributing property.
If you have a limited liability company (LLC), however, you may need to dissolve the business and re-form the LLC if one spouse wants to leave. Whether you will need to do this depends on whether you already have an agreement in place for what will happen when one of the members’ ownership is purchased or transferred. If there is no agreement in place, it may be necessary to dissolve the LLC altogether and to create a “new” business with the remaining members.
Selling the Business
Another common option in divorce is selling the business. This can be difficult-or even impossible-if the spouses are in business with additional partners, members, or owners. However, when the spouses simply are in business with one another, it is usually possible to have a business valuation done, sell the business, and have the assets and debts distributed accordingly.
Contact a Michigan Divorce Lawyer
If you have questions about divorce and your small business, a Michigan divorce lawyer can help. Contact the Law Offices of Michael A. Robbins for more information.