Starting a business after getting married often leads to questions about its division during a divorce. Understanding how the court views marital and separate property helps protect business interests.
Classifying the business as marital property
Under Arizona law, courts classify a business started during a marriage as community property. Arizona follows community property rules, which treat assets acquired during the marriage as jointly owned by both spouses. Even if only one spouse actively works on the business, contributions like financial support, raising children, or managing household duties hold equal value in the eyes of the court.
Factors courts consider in property division
Courts evaluate several factors to decide how to divide a business. They consider the business’s value, each spouse’s role in its creation or growth, and whether marital funds financed its operations. When marital efforts substantially increase the business’s value, courts often consider it a shared asset.
Options for handling the business in a divorce
Dividing a business does not necessarily involve splitting ownership. Common options include buying out the other spouse’s interest, selling the business and dividing the proceeds, or continuing with co-ownership. The business’s structure, financial health, and both spouses’ preferences influence the decision.
Protecting the business during property division
Business owners can take steps to protect their interests during divorce proceedings. Seeking a valuation ensures an accurate assessment of the business’s worth. Drafting a buy-sell agreement or working with an attorney helps define fair terms for asset division. Negotiation or mediation often provides a less contentious way to resolve disputes.
Navigating the challenges of dividing a business in divorce requires informed decision-making and thoughtful planning. Addressing these concerns proactively allows individuals to pursue solutions that support their goals and future stability.