What Happens to Your Family Business in a Massachusetts Divorce?

Building a business with your better half can be a rewarding experience for many, but if the couple decides to go down the divorce route, things can get complicated. While most divorcing spouses only have to worry about splitting up their house, business owners have to determine who ends up with ownership of the business. This is especially challenging if one spouse worked extremely hard to build the business.

With decades of family law experience in Massachusetts, Jay Davis can help you understand the factors that may affect the court’s decision in your case. Jay and his legal team at Davis Law Group have represented countless business owners and their spouses to preserve their business interests, and they can do the same for you. Give us a call at (617) 752-6216 or contact us online to set up a free consultation.

How Does a Business Division Work in a Divorce in Massachusetts?

Massachusetts is an equitable distribution state, i.e., the court divides all the assets of a couple (including their businesses) in a fair manner. Keep in mind that “fair” doesn’t necessarily mean equal. So, all assets are subject to division unless the couple has a prenuptial or postnuptial agreement, which clearly specifies how these matters will be resolved.

To put it simply, regardless of whether you started or acquired a business before tying the knot, any assets and liabilities related to the business would still be subject to division. If the divorcing couple is able to find common ground on how they want to split up their business interests, they can show that agreement to the judge for a review and get it approved, without the need for a drawn-out litigation.

If you and your soon-to-be-ex spouse have a marital agreement in place that one of you is disputing, the judge will likely evaluate the provisions of that agreement to make sure that it remains executable and realistically equitable to both of you. However, if the prenuptial agreement was well-written, it should hold up in court.

In case there is no prenup or postnup that specifies what will happen to your business when you and spouse divorces, and you are unable to reach an agreement, the Massachusetts court will have final say in the matter. In some cases, this results in costly discovery since each spouse tries to value the family business. Sometimes, separated spouses may remain co-owners of their business no matter what their marital status is, and part of the divorce is creating a new partnership agreement as ownership moves forward minus the marriage.

Another option is that one party may choose to acquire the other’s business holdings in the company in exchange for a cash payment, also known as “buying out of the interest”.

Jay Davis and his team can work hard to help you protect your business assets and suggest different ways to pursue a favorable outcome. Jay will work with one of the best financial advisors in Massachusetts to help you get a greater share of the value of the business. Call us today at (617) 752-6216 or contact us online to schedule a free, no-obligation consultation.

How the Business Value is Calculated?

No matter how small your business is, once you and your spouse decide to divorce, you will need the expertise of a financial advisor and an experienced Massachusetts family attorney to help you through the matter.

But generally speaking, a family business can be broken down to its base assets to determine its value. It can include:

• Stock and business credit or checking accounts
• Business income and expenses
• Payroll and employee benefits
• Inventory
• Real estate
• Business debt and loans

If the overall value of all its income and assets turns out to be lower than the amount of loans and debts it has, the business can be considered a loss in the divorce. In these cases, it’s still vital to work with a divorce lawyer to evaluate how the business can be divided, since debt can also be split in the divorce even if one party doesn’t have a stake in the business. Also, if one spouse took care of the home and children (if any) while the other one focused on the business, the former may still have an interest in the company.

As for how the business will be divided, it could happen in one of the following ways:

• The spouses agree to sell the business and then divide the profits and assets amongst them
• One spouse — who wishes to keep the business — buys out the other spouse and gains full ownership of the company
• The spouses agree to share the business and stay business partners

Legal Representation from a Top-Rated Divorce Attorney in Massachusetts

If you’re not sure how to proceed or which option might be best for you, consider discussing the matter with divorce attorney Jay Davis at Davis Law Group. We can provide an in-depth analysis of your case and explain the best course of action regarding dividing your business. We will work with business analysts and financial experts to help you reach the best solution. To schedule a free case review, call us at today at (617) 752-6216 or contact us online.