As an equitable distribution state, Massachusetts requires that all properties and assets that are acquired during a marriage to be divided between spouses if they divorce. Fortunately, there are exceptions to this general rule; some assets are not considered marital property and can be retained by their original owner. These include heirlooms, gifts and inheritances that are maintained separately by their owner.
Family businesses are often considered marital property if both spouses have contributed to the growth of the business. Some of the most common types of family businesses are landscaping or yard care companies, retail stores, farms and some professional practices. A business can take the form of a corporation, a partnership or a sole proprietorship.
Planning with the possibility of divorce in mind is the best way to deal with the division of a family business. For a spouse who knows little about the family’s finances, finding out everything he or she can about the business at stake is critical. A divorcing spouse should also obtain any and all financial documents that prove he or she has been a partner in the business. Without these documents, a spouse could have a hard time taking a fair and equitable share of the business and its assets. Financial documents must name the spouse as a partner, shareholder or co-owner of the business. To further protect his or her business interests, the spouse needs to know the value of the business entity. The spouse should employ the services of a professional who can do an appraisal and valuation.
Spouses may also use prenuptial agreements during property division. If a couple has drafted one before marriage, the judge is likely to honor it and hasten the division process.
Source: WOOD TV Channel 8, “Dividing a family business after divorce,” Jan. 14, 2014
