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Calculating a business share in divorce leads to a long division

It’s taken a long time to get your business to where it is today. But in a divorce, knowing how much your spouse contributed could have a big impact when it comes time to divide assets.

3.7 million small businesses in the U.S. are co-owned by married couples. But when a marriage doesn’t work out, you’re left having to figure out how to split the assets under Michigan law. The courts will determine what share you each have in the business, and it’s division going forward.

Business share

Michigan divides assets into separate and marital assets, the latter meaning your spouse could get a cut. The label that your business falls under could be a big part of what happens to it in the divorce:

  • Timing: If you opened the company before the marriage, then you’ve got a shot at calling it a separate asset. But a business acquired during your marriage could quickly fall into the shared category.
  • Funding: Starting your business with money from your partner or a shared account could mean marital property. Money invested during your marriage the led to profits or value rising could mean your partner is entitled to some of that increase.
  • Contribution: Assistance from your partner will be measured to see their level of involvement. Offerings outside of money like skills and time could all amount to your partner staking a claim.

Having the business

Once you’ve gone through the process of figuring out how involved your spouse has been in your business, it’s then time for the courts to decide how to divide the assets:

  • Partners: In an amicable divorce where cooperation is still possible, you and your partner could continue to work together. You could draw the dividing line between different branches of the business, or they may hang on to a portion of profits and shares.
  • Buyouts: If you’re unable to maintain a working relationship, or your partner wants out, buying their part may be on the table. You could walk away with their share of the business by satisfying them with monetary compensation or a larger share of other assets.
  • For sale: You could put the business up for sale and reduce everything down to a number value. At that point, the court will likely divide the profit like your other assets.

Understanding what constitutes a contribution and knowing how the courts divide assets can make a big difference when it comes time for a divorce. Prepare for the proceedings to keep your business going strong for many more years to come.