While some divorces are straightforward, easy to negotiate, and fast, others are bound to be more complex. Divorces in which one or both parties have ownership in a business are likely to be fairly challenging as marital property laws in Alabama may give the non-business owner the rights to some business assets.
What should you do if you own a business and you are getting divorced? Learn more about your options, and for more personalized advice, call Coumanis & York at 251-990-3083 to set up a consultation.
How Assets Are Split in Alabama
Before you know what is likely to happen to your business in a divorce, it’s important to understand property division laws in Alabama. Alabama is not a community property state in which all assets are split 50/50 and divided between the couple. Alabama is an equitable distribution state, which means that assets gained during the marriage or used for the benefit of the marriage should be split in a fair and equitable way.
This does not often result in an exact 50/50 split once you take into consideration factors like:
- Each partner’s income
- Each partner’s earning capacity
- Existing assets
- Health of each partner
- Contributions to the family
These and other factors determine how property is divided in a divorce in Alabama. Individual assets, which primarily includes those acquired before the marriage, stay with the individual after divorce. Marital assets, which includes those acquired during the marriage or those used for the benefit of both partners, are subject to equitable distribution.
Is a Business an Individual or Shared Asset?
Whether or not a business is split largely comes down to whether it is considered an individual asset or a shared asset. For a business to be an individual asset, it must be owned and operated by only one partner in the marriage. The money from the business must not have been used to enrich the marriage and the other partner must not have helped the business function or grow. This setup is relatively rare, and as a result, businesses are often considered marital property. It is likely that your business may be subject to division during your marriage.
How Business Division Could Look in Your Divorce
Since Alabama law does not require that property be split down the middle during a divorce, every divorce proceeding will approach business division in a slightly different way. This is great news if you are worried about paying out your partner for their role in your business or losing some ownership of your business. If your partner has substantially fewer assets than you and limited income, you may have to give up a significant portion of your assets to maintain equitable distribution. However, you can negotiate in a way that allows you to keep your business.
Compromising to Keep Your Business
A fair divorce settlement comes down to compromise, and compromise is especially important when you have a business at stake. First, you have to look at what you have and what you’re willing to give up. If keeping your business is your top priority, what are you willing to give your ex-partner to ensure that your business stays with you? In general, a business is divided so that the non-managing partner gets their share in cash. It’s rare that an ex-partner wants to have any role in managing or owning the business.
This is where it’s helpful to talk to your attorney and brainstorm some options. If your ex-partner wants to be paid out for their share of the business because they have limited income, how else can you meet that need without losing your business? You may agree to higher alimony payments, a longer duration of alimony payments, the loss of another asset, or the loss of a piece of real estate.
Let Coumanis & York Help You Through Your Divorce
Every divorce is unique, and you deserve dependable representation to help you through this process. At Coumanis & York, we have helped numerous individuals secure a fair divorce settlement and get ready for their new life. To learn more about how we can help you, call us at 251-990-3038 or get in touch with us online.