Is my Spouse Entitled to Half of My Business During Our Divorce in Virginia?
If you are going through a divorce, you know that it is a very stressful process. There is so much uncertainty about the future, where you will live, what will happen to your kids, how you will adjust to being single, etc. When there are significant and unique assets at stake, however, the divorce process is even more burdensome. And one such instance is when you have a business that your spouse is not a part of.
You have probably heard that your spouse gets half of everything when you dissolve the marriage, so you may be asking if they are entitled to half of your business during the divorce as well. The short answer to that question is – maybe.
We cannot provide a more definitive answer to this question until we know more specifics about your situation – which we will get into in more detail later on. If you are getting divorced in Virginia, the first thing you need to know is that this is not a community property state where your spouse owns half of everything you have.
Virginia is a fair and equitable distribution state, which means that the court seeks to divide marital property “fairly and equitably”, but not necessarily 50/50. This is good news for those who are worried about losing half of their business in a divorce, because there may be more room for flexibility when it comes to the division of assets.
To get a better idea of whether your spouse could get up to half of your business when you get divorced, you need to answer one very important question:
Will your Business be Considered Marital or Nonmarital Property?
It is important to realize that only property that is considered “marital” (or in other words belonging to the marital estate) needs to be included when you divide up the property. This means that if your business is nonmarital property, your spouse may not be entitled to any of it.
So of course, the next question is – what types of property would be considered nonmarital? Generally, nonmarital property would fall into one of the following categories:
- Property that was acquired before you were married.
- Property that you received as a gift or inheritance directly to you and not your spouse.
- Property that was acquired in exchange for nonmarital property, such as a business that you started with funds that you already had before you got married.
- Property that is excluded from the marital estate based on the terms and conditions of a legally valid prenuptial or postnuptial agreement.
These are general circumstances that may allow for you to keep full ownership of your business, but unfortunately, they are not always as simple and clear-cut in practice. For example, you might have started the business before you got married, but it gained a significant amount of value during the course of the marriage. Your spouse may have also contributed in some way to its growth and success – maybe just by giving up their own career and becoming a homemaker.
Another situation in which things can get clouded is when business assets become co-mingled with other marital assets to the point where the two are nearly indistinguishable. For example, maybe you took out a home equity loan to help finance the expansion of your business. Or maybe you used business funds to purchase vehicles and other personal items. If your business assets are tied closely together with your marital assets, then the court might determine that it is not practical to try to separate the two.
Another issue that could complicate things is when you have a business partner. Generally, partners outside the family are not too enthusiastic about someone’s ex-spouse becoming a part owner of their enterprise. Some wise business partners take preemptive action to avoid this scenario by setting up a partnership agreement that forbids outside owners (including any spouses) and/or gives other owners the right to buy out their share for fair market value or at a predetermined price.
Try to Negotiate a Settlement if Possible
As you can see, the question of whether a spouse gets half of your business when you get divorced can get very complicated. Maybe you are entitled to keep 100% of it, but that might not always be the case. If it appears that your spouse does have a claim to part of your business, it is best to try to work out a reasonable settlement with them rather than taking it to court. You never know how the court is going to rule, and you are likely to get a more desirable outcome if you work it out between yourselves.
If you are really intent on keeping your business, then the ideal way to resolve this issue is to give your spouse other available cash and assets that are equivalent to the value of it. This may not always be possible, however. If you do not have enough to essentially buy them out of the business, then maybe they would be willing to entertain the possibility of an installment plan over the course of a few years, for example.
These and other ideas are part of the negotiation, and in a situation like this, it is always best to have a skilled and knowledgeable Virginia divorce attorney in your corner. An experienced attorney will have in-depth familiarity with the divorce laws in the Commonwealth, and they may also be aware of some creative ways to resolve the division of marital assets that you may not have heard of.
Contact Buck, Toscano & Terezkerz for Help with Your Virginia Divorce
If you are a business owner in Virginia who is facing a divorce, Buck, Toscano & Terezkerz is here to provide the strong legal representation you need. To set up a free personalized consultation with one of our attorneys, message us online or call our office today at (434) 977-7977.