Alongi Law Firm, PLLC

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Deciding what happens to a business in a divorce

Married entrepreneurs in Maricopa County should take steps to keep their business finances separate from their marital and personal expenses. Otherwise, business assets may not be considered separate property in a divorce. A prenuptial agreement offers one of the best ways to determine what is and isn't marital property for a couple.

If the company has been funded in any way using marital assets, however, it may be difficult to claim it as separate property. This could also be the case if a spouse worked for the company at any point but was paid less than market rates. In these cases, the spouse might be able to claim a contribution to the company's value.

Some business owners may want to use a prenuptial agreement to make sure the spouse does get a share of the company's value in a divorce. The company's organizing documents could also specify what the non-owner spouse might be paid in a divorce while specifying that the company is not transferable in those circumstances.

Married business owners should keep meticulous financial records. Cash and other transactions should be recorded along with expenses and sources of capital. Some business owners prefer to pay themselves a low salary and put the rest of the profits back into the business, but spousal and child support may be calculated using a higher market rate salary.

If there is no prenuptial or other type of agreement, the spouse could be entitled to half of the company's value. This is because Arizona is a community property state, and all marital assets are supposed to be divided equally. However, it might be possible to divide the value of assets equally without splitting everything 50/50. A lawyer could help a client with the property division process.

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