If you own a business and are going through a divorce, there is a chance you may have to give up part of your business. This may happen even if you are the only one running the company.
Maryland divides assets based on the principle of equitable distribution. The courts aim to divide marital property fairly. The division may not always be equal or split 50/50.
As long as the business counts as marital property, the court may order splitting it between you and your spouse. In general, three factors determine whether a Maryland business is marital property.
When you started the business
If you started your business before marriage, the courts will likely see it as nonmarital property. However, if you used joint or marital funds for your business, that counts as commingling.
Mixing separate and marital funds may lead to your business counting as marital property.
How you acquired the business
If you inherited or acquired your business as a gift, that may classify it as separate property. The same rule applies if you bought or financed the business using money that courts can trace to a form of inheritance you received.
In such cases, it is crucial to have paperwork proving that your business was either transferred or funded via inheritance.
If you have an existing agreement
Valid agreements such as a prenuptial or postnuptial agreement may protect your business from inclusion in the division of assets during divorce. A prenup is generally recommended if you already have a business before marriage. Meanwhile, a postnup may help you retain ownership if you start the company during your marriage.
Take note that courts may scrutinize postnups more than prenups in enforcing the agreements.
How to ensure your business remains yours
If you want to ensure that your business remains yours, the first step is documentation. This does not simply mean having a prenup or postnup. It also means appropriately documenting your business funding, operational finances and other relevant details.
Proper planning and legal assistance from an experienced business law attorney can guide you toward making better decisions to protect your ownership in the event of a divorce.