Can your spouse claim a portion of your business growth?

On Behalf of | Sep 8, 2017 | Divorce

You started your company the same year that you got married. You were just 25 years old, and the company was worth $70,000. You started small and built it up.

At the time, you and your spouse did not get a prenup. You didn’t want to talk about divorce, for one thing, and your company hadn’t launched yet. When it did, a month after the wedding, you still weren’t that worried. Even if your spouse could take half, it was just $35,000.

Fast forward two decades, to when the divorce really happens. You’re 45 years old and your company is now worth $6 million. That’s far more than the value of a new car. Can your spouse claim part of just the initial $70,000 investment, if everything was organic growth, or can he or she claim part of that growth to $6 million?

In many cases, your spouse will be able to ask for a cut of the company’s increased value while you were married. This is true even if the two of you don’t work together and are not business partners in any way.

After all, your net worth is tied to the company. Your spouse may claim that money you left in the company to help it grow was a “loss” because it never reached the family. Or your spouse may claim you never would have had that success if he or she hadn’t stayed home to take care of the house and raise the kids, essentially sacrificing a second career to let you chase yours.

In complex, high-asset divorce cases, it’s crucial to know your rights, your spouse’s rights, and how the division of property could impact both your personal assets and your company.

Source: Entrepreneur, “How to Divorce-Proof Your Company,” Carol Tice, accessed Sep. 08, 2017