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Is your spouse entitled to part of your business in a divorce?

On Behalf of | Jan 27, 2022 | Family Law

During your marriage, you and your spouse shared everything and supported one another. When you divorce, you will have to start thinking about separating your finances.

Former spouses frequently argue about what they should do with big assets like homes and investment accounts. If you ran a business during your marriage, the company might be worth more than your home and your retirement account combined. It could also represent your primary source of income for the foreseeable future.

Can your spouse claim part of your business in a Tennessee divorce?

To understand about your business, you need to understand property division rules

There is no one answer about businesses in divorce that would apply to every Tennessee household. You need an understanding of the state law regarding property division and your own financial records to make an educated guess about what will happen with your business.

In Tennessee, equitable distribution is the rule. A judge wants the property division process to be fair to both spouses, which does not necessarily mean equal. The courts don’t have to split every asset either. If you owned the business prior to marriage or if you inherited it, your spouse won’t have a claim to it. The same would be true if you protected your business interests in a prenuptial agreement.

If you started the business during the marriage with marital income or invested in the business with marital assets, then you may have to share the business’s value with your spouse.

You can factor in the business without sharing it

Including a business in a property division case requires that you establish a reasonable fair market value for the business. You may need to bring in outside help for this valuation process. That amount will influence what a judge believes is a fair and appropriate property division solution if you litigate.

That amount can also help you negotiate your own settlement with your spouse outside of court.

You could offer your spouse concessions and other areas of the divorce so that you can retain ownership of the business. You could also offer them some of the company’s financial value without necessarily giving them any ownership interest or control over operations. Thinking proactively about protecting your biggest assets will be an important step as you prepare for a Tennessee divorce.