Legal Tips on How You Can Handle
Your Assets Alongside Family Life

Professionals have always struggled to strike a balance between their personal and professional lives. Moreover, when assets, either in business shares, investments, real estate, or other property types, are brought into the picture, the situation tends to become much more convoluted.

Although most individuals do not get into a marital relationship to end it, breakups can occur. And, if they are not effectively handled, they may be financially catastrophic.

Marriage vs. Common-law Relationships

Couples worldwide are increasingly opting out of marriage in favor of common-law partnerships. Although a divorce may not necessarily change day-to-day life, it may significantly influence an individual’s personal and commercial assets.

An equalization payment is computed for married couples who have decided to split to guarantee that both parties exit the marriage with an equal proportion of relevant assets. There is a tally of the worth of each spouse’s property, which often includes automobiles, real estate, stock investments, retirement accounts, and pension plans, among other assets.

The individual who has the larger net inheritance should then pay half of the disparity between their respective valuations in the form of an “equalization payment” to the person who has the lesser net family property.

Suppose a business owner is obliged to sell their business’s stock to make such a payment. In that case, the procedure may be very harmful.

It may be much more difficult for common-law couples to navigate the legal separations systems. It is not necessary to establish unjust enrichment, which is when one spouse benefitted at the cost of the other’s contribution. It is also not mandatory to establish resultant trust, where one party may demonstrate that they contributed money to the acquisition of an asset in the case of a divorce or dissolution of a civil union.

An unjust enrichment claim might be brought, for instance, if one spouse remained at home to raise the family’s children while the other built their own business. In contrast to the other parent, the stay-at-home parent did not have the opportunity to advance in their careers or collect assets.

This may be a time-consuming and drawn-out procedure since the spouse filing the claim must demonstrate how the connection harmed them to succeed.

Ownership

Because common-law spouses are presumed to be entitled to whatever assets exist in their names at the time of divorce, it is necessary to exercise caution when making joint financial commitments. For instance, if one partner owns a property and the other spends $100,000 repairing it, the latter would still probably end up with no rights to the property unless they can demonstrate unjust enrichment. This is because the house is not registered in their name.

Common-law spouses have the option of entering into a cohabitation agreement to deal with this situation effectively. These may be pretty useful in specifying what assets each spouse is entitled to in the case of a divorce or other dissolution of marriage. For married couples, a marriage contract serves as a similar document.

There are hazards connected with starting a business with your spouse or partner. Experts advise couples who own a business jointly to get into a shareholder’s agreement to protect their interests. In the case of a divorce, it will be apparent what would happen to the respective shares of each member.

Other Options

In general, there are three ways to resolve business interests upon divorce: (1) one spouse buys out the other spouse; (2) the business is sold; or (3) the co-owners remain co-owners.

Acquiring Others

The most common way for divorcing couples to deal with personal business interests is for one spouse to acquire the other spouse’s stake in the business.

Purchasing a Business

Both spouses may conclude that a buy-out of an owned business is not a feasible option. In that case, the best next method is for each spouse to sell the business and share the revenues. This is often the case when dividing other sorts of property, like marital property. However, if one spouse is adamant about running the business, a sale may be impossible without a court order.

Remain Co-Owners

A third but uncommon possibility for a business is for the partners to retain joint ownership of the business after the divorce. Although this would undoubtedly create emotional and psychological strain on the relationship and dynamics, amiable couples may continue to co-own and operate the business even after divorce or legal separations.

Alternatively, the spouses might agree that one spouse would have primary management duties for the business. The other spouse would get a proportion of future earnings to fulfill their portion of the marital assets. Based on the business’s future profitability, each spouse would risk getting more or fewer assets due to continuing co-ownership.

Conclusion

In the end, the approaches outlined above are by far the most usual ways for couples to handle a business after a divorce, according to statistics. It may be considerably more complicated when a debt, third-party agreements, and other shareholders must be considered throughout the process.

Consequently, before deciding to adopt any particular approach, it is critical for each spouse to discuss the advantages and disadvantages of all possible choices for separating businesses with their attorney, tax counselor, financial planner, and other experts.