Protecting A Business & Its Assets In An Arizona Divorce

Being one’s own boss is a dream for many, but few have the dedication to actually go out and start their own business. If you’re one of those brave few who has worked to build a business from the ground up, you will probably do everything within your power to avoid losing it. But this is exactly what could happen if you are a married business owner who eventually gets divorced. Arizona is a community property state, so almost all property will be on the table for property division negotiations, and even premarital assets can be commingled and put at risk in divorce. If you want to protect your business and its assets in an Arizona divorce, you need a family law attorney who is a fierce negotiator and a tireless litigator. Our Arizona family law team is dedicated to providing our clients with a streamlined experience that results in positive outcomes. Schedule your free consultation with a member of our team today by calling 480-680-9126. 

Dividing A Business In Divorce

A business is an asset, and just like any other asset acquired, contributed to, or maintained by community property funds, it can be subject to property division in divorce. If you started your business during your marriage, it will almost certainly be considered a community property asset unless some exception applies. If you started your business before your marriage, using personal assets to keep your business afloat or failing to pay your spouse and yourself proper salaries could muddy its separate property status. Once any asset, including a business, has been designated as a community property asset (or a commingled separate property asset), it is on the table during property division negotiations. 

How divorcing spouses should address business ownership during property division depends on several factors. Sometimes, both spouses are equal contributors and manage to run the business together amicably after divorce. Clearly, this solution isn’t appropriate for all business owner couples going through a divorce. If one spouse shoulders more business responsibilities, they may use other assets to essentially buy out their spouse’s community property share. For example, a community property business is estimated to be worth $250,000. The spouses have few assets in common besides a house also worth $250,000. Here, the spouse looking to retain 100% ownership of their company could surrender their share of the marital home to keep the business intact. This is just a simple example of how a business could be split during property division, but most situations are much more complicated. A spouse could also offer to pay spousal support if there aren’t enough assets to account for a spouse’s community property share of a business. Otherwise, the spouses could be forced to sell the business to make property division more straightforward. Even if one spouse has a majority share of the business, if there aren’t enough assets to go around, the judge could order that share to be liquidated to compensate your spouse under Arizona’s community property division system. 

If you’re reading this article, you probably wish to keep your business from being divided in an Arizona divorce. Here, acting as your own legal counsel would be a fool’s errand- especially if your spouse has retained divorce representation. You deserve skilled Arizona family law representation from a law firm where good service matters just as much as fair pricing. Schedule your free consultation with an AZ Family Law Lawyer today by calling 480-680-9126. 

Retaining Business Ownership In A Community Property State

If you’re already getting divorced, negotiation strategies are one of the only ways you can protect your business from the family law system. But if you’re still married, it’s not too late to take certain steps that can protect your business should you ever get divorced. Below are some of the steps that married business owners can take to safeguard their company. If you’d like to discuss how they apply to your unique situation with an Arizona family law lawyer, call 480-680-9126. 

-Before marrying, sign a prenuptial agreement: In some relationships, the mere suggestion of a prenuptial agreement could be fatal. In others, both partners may have assets they are seeking to protect, and might even be relieved if proposed to with a prenuptial agreement. Regardless, a prenuptial agreement could signify both of your intent to exclude your business from the property division process should you ever divorce. Every state has its own requirements for enforceability of prenuptial agreements, so you should review your situation with a family law attorney before presenting or signing anything. 

-After marrying, sign a postnuptial agreement: A postnuptial agreement can have the same purpose and effect as a prenuptial agreement, but is entered into after the wedding rather than before. It can be used to set your business apart from the community estate, although remunerating your spouse may increase the agreement’s enforceability. Talk to your family law attorney if you need tips on how to draft the agreement or convincing your spouse to sign. 

-Establish your company with sole ownership documents: This may go without saying, but your spouse will have more of a claim to your business in divorce if you list them as an owner in your establishment documents. Creating the business under sole ownership and keeping a distinction between business and personal assets can help you protect your company in a divorce. 

-Pay yourself and your spouse a reasonable wage: If you or your spouse put time and efforts into your company which are not compensated, your spouse may later go back and claim that they were to be compensated in an ownership share. If there are not enough marital assets to compensate this share, you could be forced to sell your business. While it may be desirable to reinvest profits into growing your business, failing to pay yourself or your spouse could result in your company’s destruction if you ever get divorced. To make this even simpler, don’t employ or involve your spouse in the business unless you would want them to continue to be involved after divorce. 

-Avoid mixing business and personal funds: Just like any other asset, a business that was originally separate property could be commingled if community property assets. Unless you have the utmost faith that your relationship will last until death do you part, spending business funds on personal expenses and vice versa can put your business at risk in divorce. 

Discuss Your Situation In Detail With AZ Family Law Lawyers

Reading statutes and tips about protecting a business from property division in divorce is one thing, but putting them into practice is another. When your life’s work is at stake, self-representation to save on legal fees can backfire in a devastating way. Our Phoenix Family Attorneys have experience handling divorces for business owners with a wide variety of special factors present. We can assist you in filing for divorce whether you believe it will be short and sweet, or you expect tension and fighting at every turn. Our unparalleled service comes at rates that are competitive for the Phoenix and Tucson areas. Learn more today with your free consultation by phone—call 480-680-9126 to get started.

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