There are more than 650,000 small businesses here in Colorado, all started by individuals who had a good idea plus a bit of entrepreneurial spirit. Whether it is a closely held business, a family operation or a private practice, these entities represent years of hard work. It’s natural to want to protect it, at all costs.
But during a divorce, business interests are subject to the same property division laws as your other assets. Here are four crucial questions you should consider in this situation.
1. Is the business marital property?
In a Colorado divorce, a couple does not divide absolutely everything. Separate property will remain with its owner. Marital property, however, is what will be divvied up in an equitable manner.
In order to gauge the impact of a divorce on a business, you need to determine whether it is marital or separate property. This can get a bit complicated, and will generally require assistance from an attorney.
2. What do you want with the business?
There are generally three ways a separating couple may choose to handle a business during a divorce. They might agree to:
- Sell it and divide the revenue
- Continue on as co-owners
- A fair exchange of assets that allows one person to take full ownership
In order to determine the optimal path forward, you need to decide what you want with the business in the months and years ahead.
3. What is the business worth?
Regardless of what you do with the business, an accurate valuation is vital. This number will shape every subsequent decision. If it is inaccurate, property division can quickly become skewed, leaving one party in a worse position than anticipated. Valuing a business is a complex undertaking, as it involves weighing its current and potential future worth.
4. Have I fully protected myself?
A property division agreement is, in many ways, a legal document. It is vital you take proper steps to ensure your interests are protected in a legitimate, enforceable manner. You don’t want to sign off on something only to discover problematic holes or gaps in the future.