Barbara J. Katzenberg, Attorney at Law
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What happens to the family business when a couple divorces?

A married couple owning a family business is not unusual. Sometimes it is a business the couple formed and developed together. In other instances, one spouse may have developed the business and the other is an owner in name only.

Business ownership in Massachusetts, like the ownership of a home or retirement savings, can be marital property subject to property division in an equitable fashion should the couple divorce.

A recent court ruling by the Massachusetts Appeals Court, determined that a probate judge has permission to determine how a business is to be distributed during divorce.

According to news sources, the issue was brought forward during the divorce and division of assets for a couple who jointly owned a West Barnstable feed and grain business. During the divorce proceedings, the probate judge granted the ownership of the business to the husband. However, the husband additionally requested that the wife, who is a veterinarian, not enter into any business of a similar nature as it would be competition for the existing feed and grain business.

The probate judge denied the request on the sole basis that he did not have the authority to make the decision. In the Appeals Court ruling, it was stated that the probate judge did have the authority and that further, according to 100 years of rulings; "good will" was a commodity that could be divided.

At this point, the decision is going back to the probate judge for a final determination. The judge either may, or may not, grant the husband's non-compete request.

During divorce, if a couple cannot come to an agreement on how to divide their property, the court will make those decisions for them. It is recommended that anyone who is divorcing consult with an attorney to make certain that one's interests are protected -- not only in the division of property, but in other matters as well.

Source: Cape Cod Times, "Court: Judge can issue orders for businesses caught-up in divorces," May 4, 2012

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