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How can business owners protect their interests during divorce?

On Behalf of | Nov 23, 2021 | Divorce, Property Division

Divorce is more than just the end of a romantic relationship; it is also the end of a contractual agreement. When we get married, we agree to a legal arrangement between ourselves and our spouse. The legal side of the marriage means that there are specific rules to follow when either or both parties decide to end that relationship.

One of the most difficult set of rules to navigate during this process are those that involve property division.

How does property division work when a couple from Georgia gets divorced?

It is important to take the state into account, as divorce is a creature of state law. These laws will dictate how the divorce moves forward. This piece will focus on the laws for Georgia. Information is also available at the Cobb County’s law library.

Georgia uses the legal theory of equitable distribution when it comes to divorce. This basically means that the courts have the power to distribute assets in a manner it views as fair. The first step in this process generally involves determining which property is separate, owned by one spouse and not divisible during divorce, and which is marital, owned by both and subject to division.

Separate property can include assets like gifts and inheritances as well as those owned prior to the marriage. It is imperative that the owner of separate property keep it separate from marital property, like joint accounts, throughout the marriage in order for it to maintain its separate status. The court is likely to consider a separate asset as marital property if the owner of the separate asset commingles it with other forms of marital property.

Isn’t my business separate from marital property?

Although additional information is available at the Cobb County law library, as noted above, it is important to point out that their staff cannot provide legal advice. The actual answer to this and other questions will depend on a review of the details.

When it comes to this specific question, it is generally true that those who started the business before the marriage and kept it separate could possibly convince the court the business itself qualifies as separate. However, if it grew significantly during the marriage the court could consider that growth as marital property.

How can I make sure my divorce does not negatively impact my business?

Ideally you will have a prenuptial or postnuptial agreement that outlines how the court should handle the business in the event of a divorce. If not, some steps that experts have found to help in the past can include:

  • Records. Keep clear records of where the money to fund the business came from. This is especially helpful when those sources were from outside of the marriage.
  • Income. The business can be further separated if you are taking a clear income. This would provide a form of separation that shows what funds you used within the marriage and how they were separate from the business itself. It is best if this income is in line with market standards.
  • Documentation. Review the organization documents for the business. They may include a provision that states the business cannot be transferred in the event of a divorce.

Navigating this process in Marietta, Cobb and other counties throughout Georgia is not easy, but these and other steps can help to better ensure your interests are protected throughout the divorce proceeding.