It is no secret that divorce upends an individual’s personal life. If that person happens to be a business owner, his or her business can also experience negative effects from the divorce if his or her attention and time is occupied with the divorce.
Not only this, but in an Arizona divorce your business will almost certainly be an asset that the court will want to examine closely and of which the other party will want to get a portion. This can be unnerving for many business owners as they contemplate the future of their business (or whether their business will even have a future). With experienced legal counsel by your side, however, a divorce does not necessarily have to mean the end of your business.
How Does Arizona Distribute Property During a Divorce?
There are two systems of property division used by the states in divorce cases: equitable distribution states look at all of the marital assets the couple accumulated during the marriage and then divides this property (or the value thereof) in a fair and equitable manner. In community property states, everything – with limited exceptions – that the couple earned or gained either individually or jointly is considered “community property” and is divided by the court as part of the divorce. Arizona is a community property state.
What Does This Mean for My Business?
Because Arizona is a community property state, one of the first inquiries the court will make is whether the business was begun and ended before or after the marriage. If so, the business and any income that had been generated thereby remains your property. So, for example, if you operated a small business before you were married, earned $100,000 in profits and then sold your business for an additional $100,000 before you were married, that $200,000 would be considered your own separate property and you would be entitled to the $200,000. This is a rare situation, however.
In most divorces involving a business, the business may have been started before the marriage but it continued during the marriage. In this situation, there is community property that needs to be divided: namely, the value of the business from the date of the marriage to the date of the divorce. Profits realized and an increase in the overall value of the business would be considered community property and subject to division by the court.
It makes no difference in Arizona if your spouse worked in any capacity at the business or contributed in any way to your business’s success. In order to determine the value of the business, accountants, appraisers, and other similar “experts” will be hired and consulted by both parties. Their findings will be presented to the court at a hearing, and the court will make a ruling as to the community property value of the business.
In most (if not all) situations, a court would not order that you sell a profitable business or a business you rely upon for your living or order that ownership of the business be split between you and your spouse.
What Benefit is There in Hiring an Attorney Then?
If you are a business owner who is going through a divorce, legal counsel can assist in making sure your business is valued fairly and accurately. Many judges are not well-versed in how businesses are valued or appraised and will rely heavily on the experts hired by the parties in making their determinations. An experienced business law attorney will not only have the resources necessary to have your business accurately appraised, but can also explain this process to the court in a manner that the court can understand and is persuaded by.
Patrick J. Monahan represents both business clients and clients filing for divorce and is experienced and knowledgeable about how a business’s worth should be determined and divided during an Arizona divorce. Contact him for assistance with your divorce or business law issue by calling (623) 385-3190.