If you are beginning to plan for a divorce in Michigan and you own a business, our Michigan divorce lawyers know that you likely have urgent questions about how business assets are divided in a divorce. As you may know, Michigan is an equitable distribution state, which means that all marital assets, along with marital debts, are divided in a way that the court considers to be equitable for both spouses. Yet before the court can even reach the point of deciding how to divide assets, which may include business assets, the court will need to determine which of the assets owned by the parties should actually be classified as marital assets, making them divisible in a divorce. The following are steps in the process of dividing business assets in a divorce under Michigan divorce law.
Determine if Business Assets Should be Classified as Marital or Separate (Non-Marital) Property
When you have a business and you are getting divorced, the first step in determining how—and whether—business assets will be divided in a divorce is to determine if these assets should be classified as marital or separate property. If the assets are separate property, the court will not need to go any further in actually distributing the business assets because they will not be divisible. What assets are considered to be separate or non-marital property?
Generally speaking, assets are separate or non-marital property when they were acquired prior to the date of the marriage, when they were acquired during the marriage with solely separate property, or when they were acquired during the marriage as a gift or inheritance. Accordingly, if you purchased your business prior to your marriage or inherited it during the marriage and have not invested any marital assets into the business, the business assets may not be divisible.
Keep in mind, however, that even if you did purchase the business before your marriage, the business assets may be commingled with marital property if you used any marital assets to improve the business, to purchase tools or materials for the business, or any other type of investment. Commingled assets will typically be identified, and the court will do its best to determine which portion or percentage of the commingled assets are separate (and not divisible) and which are marital (and divisible).
Valuing Business Assets
Any business assets classified as marital property will need to be valued. It is usually a good idea to work with an independent appraiser with specific knowledge of businesses like yours to ensure that all assets are valued appropriately.
Deciding How Division Will Work
In general, business assets that are divisible in a divorce will need to be distributed between the spouses. As such, it may be necessary to sell the business so that the assets can be liquidated or distributed. Alternatively, you may be able to buy out your spouse’s interest in the business assets, or you may be able to negotiate a marital settlement agreement in which you retain all of the business assets in exchange for giving up your claim to other marital assets. And in some cases, spouses are able to work together amicably, meaning their business can stay open and each spouse can retain his or her interest in a certain portion of the business.
Seek Advice from a Michigan Property Division Lawyer
If you are getting divorced and have questions about equitable distribution and the division of business assets, a Michigan divorce attorney can assist you. Contact the Law Offices of Michael A. Robbins today for more information.