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How Does a Business Get Divided in a Missouri Divorce?
The Missouri legal system sees marriage as an equal partnership and treats marital property in general terms. All assets, including income from employment or business, increase in investments, and growth in company shares are presumed marital property if they were acquired during the marriage.
As such, the law views marriage as a partnership of equal shareholders. Divorce therefore starts with the assumption that each spouse has an equal share in all marital property.
In a divorce, Missouri has two major categories of property – marital and separate. Marital property is that accrued during the course of the marriage up until separation becomes final.
Separate or non-marital property is that owned by a spouse before the marriage. These include property that has been acquired as a gift, or inheritance, or excluded by the divorcing couple through mutual agreement. Non-marital property cannot be awarded by the court to the other spouse.
A non-marital property’s increase in value is categorized as non-marital in Missouri. However, interest or dividends derived from non-marital property is considered marital.
How are business assets divided in a divorce in Missouri?
Dividing business assets in a Missouri divorce can be a complex process –categorizing them into marital or non-marital assets presents various challenges. There are several factors that determine how a business can be divided and define whether it is marital or non-marital.
These factors are:
- The date the marriage began and the date one or both spouses started, invested, or acquired shares of a business
- The amount and source of funds used as business capital
- The amount of money invested by the couple for their business
- Other factors like the amount of time, involvement, and actual work put in by one or both spouses for the business
Once it has been ascertained as marital property and a spouse’s valid involvement in it defined, the court proceeds to value or valuate the business.
In the case of small businesses, both spouses can calculate the value of their business and then divide it. Bigger, complicated businesses need valuation by professionals. Experts like an Accredited Senior Appraiser (ASA) or a Certified Business Appraiser (CBA) can examine the assets, income, debts, and other financial records of the business to estimate its value.
Couples who co-own a business with a high monetary value can hire different independent evaluation experts. Upon determining the value of the business, these experts will declare their respective findings to the court. If both spouses decide to settle the matter in court, then the judge will make the final decision.
How do I protect my business interests during a MO divorce?
Couples can voluntarily make a business partnership agreement regarding the division of assets in case of divorce, with fair and full disclosure, and the opportunity to seek advice from an attorney.
A business partnership agreement may specifically define ownership roles and set a limit on the value a spouse can claim if the spouse has shares in the business. In case of a divorce, a spouse can agree to waive whatever interest they have or leave the business in exchange for a defined payout which they can receive over time.
So, if the couple agrees to a 60-40 interest at the start of their jointly owned business, that agreement rules over the interest in the company without exception. The lesser shared spouse, however, is not barred from claiming more in family court.
Another option is an employment contract where one spouse receives an income as well as a fixed share in profits or business ownership derived from length of service.
The best option, however, is a prenuptial or postnuptial agreement that fixes the exact interest each spouse has in their co-owned business. It provides the strongest protection, making sure the business creating party keeps a bigger share of the profit.
A prenuptial agreement allows both spouses maximum flexibility to look at ways to protect the business and their own interest at the same time. Neither party will be treated unfairly so the court need not intervene.
In the absence of a prenuptial or postnuptial agreement, the spouse who wants to retain the business could offer the other spouse other marital assets of the same value in exchange of their share in the business. If a spouse depends solely on the business for their livelihood, it may make sense to give up a future asset, like a retirement fund, to keep the business. Entered contractually, the business could also be exchanged for spousal support set up to be paid as an annuity.
If the above options are not possible, the couple should reach an agreement to work together so the court doesn’t have to decide. For instance, the court can order one spouse to pay off the other spouse for their interest in the business, although the lump sum payment can drain the paying spouse of financial resources. Thus, the paying spouse should think of other types of longer-term payment plans to buy the other spouse’s interest.
Get in touch with an experienced attorney
It is vitally important to hire an attorney experienced in handling financial matters when it comes to a divorce. You also need to find a compassionate attorney whom you can personally trust. Divorce is an emotionally-draining process that requires tact, sensitivity to the needs of others, and good communication skills on the part of the attorney, not just legal knowledge.
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Shea Kohl Law, LC serves clients in Missouri including St. Charles, Troy and Lincoln and throughout Warren and St. Louis counties. We also serve clients in Illinois.