If you and your spouse own a family business, your divorce will likely involve more than dividing your home or bank accounts. The business you built together or the company one of you brought into the marriage may become part of the property division process. Questions about who will keep the business, how the court will value it and whether it will affect the rest of your property can quickly become central to your divorce.
In Ohio, a family-owned business does not automatically get divided in half. Instead, the court will decide whether all or part of the business qualifies as marital property and how it fits into the overall division of assets. The outcome depends on factors such as when the business began, how it grew during the marriage and each spouse’s contributions.
Is your business marital or separate property?
One of the first questions the court will answer is whether your business is separate property, marital property or a combination of both. To make that decision, the court may consider the following:
- When you started the business
- How marital income supported or expanded the business
- How each spouse contributed to running or managing the business
- Whether the business increased in value during the marriage
- Whether you kept business and personal finances separate
The answers to these questions help determine whether part or all of your business becomes part of the marital estate.
How will the court determine your business’s value?
If your business becomes part of the marital estate, the court must determine its value before dividing property. That value can influence the overall distribution of assets, especially if the business represents a large portion of your family’s wealth.
The valuation may include your company’s assets, liabilities, income history and future earning potential. In some cases, financial professionals prepare a valuation that helps establish the business’s fair market value.
Will you have to sell the business?
Selling your business is only one possible outcome. In many divorces, the court can divide the value of the business without requiring a sale. If your business is part of the marital estate, the court may consider options such as:
- Awarding the business to one spouse with a buyout of the other spouse’s interest
- Offsetting the business’s value with other marital assets
- Allowing both spouses to continue owning the business together in limited situations
- Ordering a sale when no other option fairly divides the marital estate
The approach will depend on your business, your assets and the circumstances of your divorce.
What this could mean for your business
For many business owners, a family business represents years of work as well as an important source of income. If your divorce includes business interests, the business’s value and ownership can affect how the court divides the rest of your marital property.
Whether you started the business before the marriage, built it together or expanded it during the marriage can all influence the outcome. Knowing how Ohio courts evaluate these issues can help you better understand what to expect as your divorce moves through the legal process.