Your divorce is a time of significant upheaval in your life. Not only is it the end of a relationship, your divorce can have a significant impact on your household, your family and your relationships. If you are a small business owner, that business could also see changes as a result. If you were to get a divorce, what would be the fate of your business? That depends on your exact situation.
Property division in Michigan divorce
Michigan is an equitable division state, which means that property is divided fairly but it is not necessarily divided in half in a divorce. Michigan also recognizes a difference between marital property—property that is owned jointly—and separate property—property that belongs to only one of you. Marital property will be divided during your divorce
What does this mean for your business? That depends on the particulars of your business. If your business was acquired or founded before your marriage, it may be considered separate property. However, if your business was acquired during the course of your marriage, if you used marital property to fund the business or if you and your spouse both contributed to it, then it may be considered marital property.
How can you ensure that you and your business are treated fairly?
If your business is considered marital property, you may want to take precautions to protect that business during your divorce.
First, be sure that the value of your business is properly and impartially assessed. Not only will this give you a better idea of how property should be divided, it will also give you the chance to have specifics during negotiation.
Be sure to yourself a fair salary. Especially when you are passionate about your business and seeing it grow, it can be tempting to invest more money in your business than yourself. However, if you are underpaying yourself, your business could be treated as marital property and your spouse could be entitled to more of the business as a result.
You could also negotiate sole ownership of the business by sacrificing other assets. If you have vacation property like a cabin, for example, you could negotiate that your spouse receives this property to offset your ownership of the business. You could also take on more marital debt so that the division will remain equitable.
If your spouse is to be given a portion of the business as a part of your divorce, consider buying their share from them. This will allow you to maintain control of the business that you have built.
When you are a small business owner, your divorce could mean big changes for your business. However, it is possible to protect yourself and your business and to give both the best possible start after your divorce.