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Michael A. Johnson
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How spouses may be entitled to part of a business in divorce

| Feb 26, 2019 | Divorce |

Some business owners in Arizona might hesitate to get a prenuptial agreement because they do not want to appear as though they are preparing for divorce. However, a prenup can give a couple the opportunity to decide how they will divide properly fairly in less emotional circumstances and can help protect a business. If the prenup makes the business separate property, the complex process of valuating the business prior to divorce can be avoided.

Prenups can also name what percentage of the business the spouse is entitled to or make plans in case the spouses are co-owners. Some couples may want to share the business even in the event of the divorce.

Another way to protect a business is through careful financial recordkeeping and structuring the company’s organizing documents. The latter could establish that the business cannot be transferred if there is a divorce. Business owners should separate their business expenses from personal ones. A spouse may be able to claim a larger percentage of the business if marital money is used to fund the business or if the spouse is underpaid for work done for the company. Even if business owners pay themselves less than a market rate salary, a spouse may ask the court to use a market rate salary to determine child and spousal support payments.

A spouse might be entitled to half of the value of a business if no other arrangements are in place. Since Arizona is a community property state, most assets acquired after the marriage or any value gained by existing assets during the marriage are considered shared property and are supposed to be equally divided. Through mediation, it might be possible to reach a divorce agreement without going to court. The couple may agree to other ways of dividing property that do not involve splitting all property equally.

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