According to the United States Small Business Administration, 99.9% of all businesses in the United States are small businesses. Many people own small businesses with their spouses or other family members. They may realize that they will be unable to continue operating their business with a spouse and choose to sell, raising the question of whether they should sell their business before the divorce or after it. Here is what to know about this complex topic.
Colorado Equitable Distribution Laws
Colorado is an equitable distribution state. This means that if the parties are unable to reach an agreement regarding how they want their property to be divided, the court can decide how to equitably and justly divide their property.
Generally, any property acquired after the marriage is considered marital property, regardless of how the property is titled. Therefore, even if the business is only in one spouse’s name, it might still be considered marital property if it was opened after the marriage. An increase in the value of separate property can also be subject to marital property that is subject to division during a divorce.
If the property is separate, you could choose to sell it whenever you like. However, Colorado courts can consider the value of separate property when dividing marital property. If you sell the business before the divorce and your spouse has a claim to part of the proceeds, they could allege that you sold the property for less than its value or that you committed fraud.
If the business is considered marital property, you will want to reach an agreement with your spouse about how to sell the business and at what price. Get this agreement in writing to protect your interests. Selling the business before the divorce can help avoid the cost and time associated with having judicial oversight of the sale.
If you are unable to reach an agreement regarding the business, the court can order it sold during the divorce proceedings.
Legal Challenges of Selling a Business During Divorce
Several legal challenges can arise within the course of selling a business during a divorce, including:
- There may be a temporary restraining order in your case – The court may issue an order that prohibits you from selling any marital property until the case is resolved or it otherwise approves the transaction. This can slow the process down of selling the family business.
- You may disagree – You may not agree with your spouse about how to manage the business in the interim. You might want to continue running the business but they might want you to sell it and split the proceeds.
- It can be difficult to determine the value – You will want to try to estimate the fair market value of the business to sell it. However, there are many different ways to evaluate a business’ selling price, so it may be complicated to arrive at a figure that seems fair to both of you.
Contact Our Divorce Lawyers for Legal Advice and Guidance
The decisions to sell a business and get a divorce are important ones. There may be lasting implications to selling a business before your final property division if the sale is not handled properly. An experienced business owner divorce lawyer in Boulder from Stahly Mehrtens Miner LLC can evaluate your situation, explain your options, and advise you of the best course to take to protect your interests. Call us for a confidential consultation at at (855) 963-4968.