You’re already dividing up your nearest and dearest possessions, deciding how to split time with your children, and facing the end of a relationship you thought would last forever. Is there really anything else that can make divorce even more challenging?
If you have a family-owned business, be ready for it to get caught in the crossfire of divorce. However, there are different ways you can handle this issue and protect your business. To discuss your divorce in greater detail, call Holcomb & Russell at 228-206-5843.
How Family Businesses Are Handled in Mississippi Divorces
In most divorces, family businesses are considered marital property. In Mississippi, this means that the business would be divided in an equitable manner. Note that equitable is not the same as equal.
Equitable division of assets means taking into account each party’s income, contributions to the marriage, earning ability, health, and other factors. With all of those factors, the division of assets may end up heavily favoring one side in order to compensate for the advantages the other party has.
Assuming that your business is marital property, you should assume that it will likely be divided up in one way or another.
Prenuptial Agreements
The main exception to this assumption is a divorce in which there is a prenuptial agreement. This is fairly common in marriages with multigenerational family businesses. In these situations, the parents or grandparents who own the majority of the business may require that younger family members have a prenuptial agreement before they get their share of the business.
This would protect the business from being divided up in a divorce and causing family strife. It’s still important to review this with your attorney, though—just having a prenuptial agreement doesn’t guarantee that the court will uphold it. If a prenuptial agreement is wildly unfair to one party or contains unenforceable clauses, the court may dismiss it entirely.
Look At How You Handled the Business During the Marriage
There are also situations in which a family business may be considered separate property. This largely depends on how the business was handled during your time together. How did you pay for business expenses and receive compensation for your work in the business? Did your spouse do work for the business or otherwise contribute to its growth?
For example, if you owned your share of the business prior to the marriage and then kept it completely separate from your marital assets and debts, it may still be considered separate. This is sometimes the case if the partial owner draws a salary as an employee, rather than pulling funds from their share of the business itself.
However, if the non-owning spouse contributed to the business, this option falls flat. Consider a family business where the spouse occasionally works for free to cover shifts, does weekly accounting for the business, or has put in extra time as a homemaker or parent in order to allow their spouse more time to work on the business. In this case, they would likely still be entitled to a share of the company.
When a Business Split is Necessary
Should you owe part of the family business to your ex, don’t worry. You’re not necessarily doomed to a life of co-owning a business with your ex-spouse. In most situations, you simply buy out your ex’s share of the business. Remember, the odds are good that they also don’t want to run a business alongside their ex.
You may give up part of your other share of marital assets in order to keep the business entirely in your name. This is a helpful option if, for example, your ex wants full ownership of the house or to keep their own retirement accounts in solely their name. Discuss your options with your lawyer.
Choose Holcomb & Russell for Your Family Law Needs
Wherever you are in the divorce process, the team at Holcomb & Russell can help you make the best decisions for your future. Let’s sit down and talk about your split and what you hope to have when your divorce is over. Just give us a call at 228-206-5843 or send us a message online to set up a consultation.
