Although the concept of a high asset divorce is somewhat nebulous, most lawyers agree that when more than a million dollars is on the table, you’re in a high asset divorce. One of the most common sources of wealth in such cases are business assets. Here in Oklahoma City, there are several ways that business assets can be handled during divorce proceedings. We’ll examine each of the possible outcomes and give you some advice to secure the best result possible.
How Are Business Assets Divided in a High Asset Divorce in Oklahoma City?
Possible Outcomes for Business Assets in a Divorce
Generally speaking, there are three ways that your business assets could be split up in the event of a divorce. Assuming you haven’t come to any sort of amicable mutual agreement with your spouse, the court will choose the path they consider most equitable for both parties. However, this does not mean that your business assets will simply be chopped into two parts and distributed equally. Equitable does not mean equal.
There are the three possible scenarios that could occur. We’ll then examine the factors that judges weigh when making a decision as to which route to take.
One Spouse Keeps the Business
The most common outcome is for one spouse to retain majority ownership of the business and continue to operate it. This decision is far from arbitrary. The court will examine which of the two spouses is the most active participant in the business. Whoever can demonstrate that they have dedicated the most time to the company is the one that is most likely to leave with the business.
If your business has additional owners or shareholders, their stake won’t influence your trial. For instance, if your business partner holds 30% of the company, and you hold the other 70% jointly with your spouse, then the court will only look to divide that 70% between the two of you.
Compensation in These Cases
Most of the time, the spouse that proves majority involvement in the business will keep all of their share of the company. This means that the other spouse will receive compensation for whatever portion of the business they’ve been assigned. Since having a divorced spouse as a major shareholder can present problems for company operations, this is typically the best route to take for married business owners.
Determining the exact amount, however, can be complicated. Unless your company is publicly traded, you’ll likely need to hire someone to evaluate your business and assess its value. Outdated valuations will be challenged in court, so a recent report is essential. The final determination can be paid using other assets from your divorce.
Court Orders Business to Be Sold Off
The court can also order you to liquidate your business in order to divide its assets. This is most common when the business has not been operating for some time but still has valuable assets in its inventory. Courts will almost never force a functional, profitable business to close its doors. If you’re worried that the court may liquidate your business, it’s in your best interests to show ongoing activity.
Even if your business isn’t fully operational at the moment of your divorce, if you can show that you’re taking steps to bring a product or service to market and that you’re continually investing in the business, an Oklahoma City court is likely to let you keep it.
Both Spouses Retain Ownership and Operation
This is by far the rarest outcome, simply because these cases rarely end up in court. For both spouses to keep their shares of the company and operate it together, the divorce process must be quite amicable. Friendly divorces are typically settled out of court, so it’s highly unusual to see courts award joint ownership of the business.
Where this may happen, however, is in a case where the two spouses truly are joint partners in the company and both desire to continue in the business, yet disagree on their fair share. Perhaps one spouse feels they’ve invested more time and money into the business than the other, or both play such an essential role in the company that it’s impossible for one to take over without the other present. We advise against this type of disposition of business interests, as often times the business partnership is unsuccessfull and future litgitation may be required to divide the business. However, some parties are able to continue in a business relationship, which may be the most financially beneficial disposition of business interests in a divorce.
What Determines the Outcome?
How do courts decide whether your business assets are on the table in a high asset divorce? In Oklahoma, courts must first determine whether your assets qualify as “marital” assets or “separate” assets. Marital assets are those that you’ve acquired or created together as a couple, through joint marital efforts or one party was able to develop or create a business based in part on the support of thier spouse. Separate assets are ones that you possessed prior to marriage or ones that you acquired on your own using your own separate assets.
Nevertheless, separate assets can become marital assets when your spouse contributes to them. If you started a business on your own, then got married, and then your spouse helped you with the business, your business assets can be considered marital assets. A prenuptial agreement can protect your separate business interests; however, it is important to not comingle the business with your spouse, as the prenuptial agreement may be voided as it relates to your “separate asset” or separate interests in the business. There are other factors that the court will consider as well.
The History of the Business
The origins and development of your business will certainly be discussed. Can you demonstrate how your business idea was conceived and brought to fruition? This is often one of the most difficult components to prove. It’s easy for a spouse to claim that they were integral to the development of the business. If you have emails, text messages, or any other form of documentation, you’ll want to bring it to court.
Financial investment in the business is also important to demonstrate. If you started your business prior to your marriage, it should be easier to show you ought to retain ownership. However, if you started the business while married, you’ll need to be more meticulous with your documents and arguments. This is where an experienced divorce lawyer can be extremely useful.
Your Level of Involvement
Just because one person created the business doesn’t mean that the other party isn’t entitled to compensation for their time. A great, albeit extreme example is that of Jeff Bezos’ divorce. His then-wife showed her involvement in the early years of Amazon and was able to receive substantial compensation based on the current value of the business.
The more time you spent building your company up, the more likely you are to retain ownership. The hours invested by both parties will be taken into consideration in court.
How to Secure A Fair Settlement
As you can see, there are many variables at play in high net worth divorces. Business assets can be divided in several different ways, and the exact determination will come down to what you can prove in court. It’s vital that you have quality representation on your side to guide you through the process. Experienced lawyers know the most reliable ways to demonstrate involvement in a small business. They can help you document your case and secure a fair settlement.
If you’re contemplating divorce, or you’ve already begun the process, you should consult a lawyer immediately. Call Cannon & Associates in Oklahoma City today to speak with one of our representatives and learn more about how we can help defend you and your assets in a divorce.