,Running a business is hard enough on its own. Going through a divorce at the same time can feel overwhelming. The decisions you make during this period can affect your company for years, and the stakes are high.
At the law firm of Jaspers, Moriarty & Wetherille, P.A., we work with business owners in Shakopee and throughout Scott County who are navigating divorce while trying to protect what they have built. Our lawyers handle business law, family law, and divorce matters, so we are uniquely positioned to help you if your marriage is dissolving. With the right legal guidance in place early, many business owners can reach fair resolutions without handing over control of their company or watching a decade of hard work come apart.
Minnesota uses what is called an equitable distribution system. This means that marital property, meaning property acquired during marriage, is divided in a way the court considers fair. Fair does not always mean equal. Courts look at a range of factors, including the length of the marriage, each spouse’s income and earning capacity, and each person’s contribution to the household and the marital estate.
A business can be marital property, non-marital property, or some combination of both. If you started your business after you got married, it is generally treated as marital property, even if your spouse had no formal role in running it. If you owned the business before the marriage, it may still have a marital component to the extent marital funds or efforts contributed to its growth.
Depending on whether your case is contested, meaning you and your spouse disagree on significant issues, the process can take anywhere from a few months to well over a year. Contested divorces involving a business often take longer because of the time required to complete a valuation and conduct financial discovery.
During that period, your business keeps running. Decisions you make while the divorce is pending can have consequences. For example, if you take on significant new debt, make large capital purchases, or change how you pay yourself, those decisions will be scrutinized. Discuss which business decisions are appropriate to make while your divorce is pending with your lawyer.
The documentation requests, the financial disclosures, the negotiations, all of it takes time and mental energy. Plan for this in advance and delegate business duties where possible to help protect the business during the process.
A few patterns come up in business owner divorces that can create problems down the line.
Undervaluing the business. Some business owners assume that a low valuation will benefit them by reducing what their spouse can claim. This can backfire. Courts may appoint their own expert, or the other spouse may retain a valuation professional who challenges a number that appears artificially low. If your business and personal finances have been comingled, meaning you have paid personal expenses through the business or deposited business income into personal accounts, tell your attorney about it early. It affects how the business is valued and how income is calculated.
Mixing personal and business finances. If personal expenses have been run through the business for years, untangling those records during divorce can be time-consuming and expensive. It can also make your reported business income look different from what it is.
Waiting too long to get legal help. The earlier you involve an attorney in the process, the more options you typically have. Decisions made before legal counsel is in place are sometimes difficult or impossible to undo.
Ignoring the tax consequences. Transferring business assets as part of a divorce settlement can have significant tax implications. A buyout structure that looks fair on paper may look very different after taxes are accounted for. Your attorney should be coordinating with a tax professional on these issues.
If you are a business owner facing divorce, or if you have questions about how your business might be treated in a dissolution proceeding, reaching out to an experienced family law and business law attorney early can give you a clearer picture of what to expect. The decisions made at the beginning of this process often shape the outcome at the end. Our law firm handles both family law and business law under one roof, so you are not stuck coordinating between two separate firms.
Contact Jaspers, Moriarty & Wetherille, P.A., to schedule a consultation with a member of our family law team. We are ready to listen, answer your questions honestly, and help you make informed decisions about your business and your future. Our Shakopee law office serves business owners throughout Scott County and the surrounding communities.
Does my spouse have a claim to my business?
Possibly. The answer depends on when the business was started, how it was funded, whether marital money was used to grow it, and whether your spouse contributed to the business in any way, even informally. Courts in Scott County consider all of these factors. There is no simple yes or no answer without looking at the specific facts of your situation.
How is a business valued during a Minnesota divorce?
Before any division can happen, the business needs to be assigned a value. This is called a business valuation, and it is often one of the most contested parts of a divorce involving a business owner. There are several approaches appraisers use:
Each method can produce a different number. If you and your spouse hire separate appraisers, those numbers may differ significantly. In some cases, the parties agree to use a neutral valuation expert to reduce costs and conflict. Whether to use a shared expert or retain your own is a decision worth discussing carefully with your lawyer.
What happens if my business is not easy to sell or divide?
Many closely held businesses, including small retail operations, professional practices, and service companies, cannot simply be split down the middle. You cannot hand your spouse half of a restaurant or divide a contracting business the way you divide a bank account. Courts and attorneys generally look at several practical options:
The most common outcome is that the business-owning spouse retains the company and the other spouse receives assets of comparable value, such as real estate, retirement accounts, or a cash settlement.
Can my spouse claim part of my business income as spousal maintenance?
This is a question many business owners overlook. Spousal maintenance, sometimes called alimony, is financial support paid by one spouse to the other after divorce. Courts consider each spouse’s income when determining whether maintenance is appropriate and how much it should be. If your business generates significant income, that income may factor into a spousal maintenance calculation.
There is an added layer of complexity here. Business owners often have more control over how income is reported than a salaried employee does. Courts and opposing attorneys are aware of this. If your business finances and personal finances are closely intertwined, or if your income fluctuates from year to year, expect that to be examined closely. A forensic accountant, meaning a financial professional trained to analyze financial records in legal proceedings, may be brought in to review tax returns, business accounts, and financial statements.
Is goodwill considered an asset for divorce purposes?
Goodwill is the value of a business that comes from its reputation, customer relationships, and ongoing earning potential, rather than from physical assets. In Minnesota divorces, courts may distinguish between enterprise goodwill, which belongs to the business itself and may be subject to division, and personal goodwill, which is tied to the individual owner’s skills and relationships and may not be treated as a marital asset.
This distinction can significantly affect how a business is valued. A law practice, a medical office, or a consulting firm may carry substantial personal goodwill that should arguably remain with the owner. Getting this right requires an appraiser who understands how Minnesota courts approach this issue.
Can a prenuptial or postnuptial agreement protect a business?
If you signed a prenuptial agreement before you were married, its terms could significantly affect how your business is treated in the divorce. If the agreement is valid and clearly addresses business ownership, it may limit what is subject to division.
Postnuptial agreements, which are similar contracts signed during the marriage, can also address business ownership. Courts in Minnesota generally enforce these agreements if they satisfy statutory procedural and substantive fairness requirements, including independent legal representation and full financial disclosure.
Are you going through a divorce in Minnesota? If so, you need experienced legal guidance to help you assert your rights and seek the fair outcome you deserve. Call Jaspers, Moriarty & Wetherille, P.A. now or reach out online for an initial consultation with a Shakopee divorce attorney who cares.
