Is my small business marital property in a Minnesota divorce?

On Behalf of | Mar 28, 2024 | Blog, Divorce |

In a Minnesota divorce, what the court constitutes as marital property can significantly impact your financial health after the split. One primary consideration is any small businesses either of you own.

Even if you are the only party with ownership, your business could still be shared property in the court’s eyes. Find out what factors go into that decision.

When the business started or grew

The court typically treats a business like any other asset. Therefore, an initial factor is when you establish the company. If you started it before the marriage, that will work in favor of it being separate property. However, a launch date during the marriage usually makes it marital property.

A separate business can also become a marital asset if you significantly expand it during your time together as marriage mates. The court tends to see your spouse’s support as contributing to a company’s success. This is true whether that assistance is financial or nonmonetary.

Your spouse’s level of involvement

If both of you actively participated in running the business or contributed to its growth and success, the court will likely view it as marital property. Even if you are the only official owner, your spouse’s help and sacrifices may still entitle her or him to a share of its value. These contributions can be as simple as suggestions and advice that lead to profitability.

The separation or commingling of assets

Any separate property can become a marital asset if you mix it with shared funds. With your business, this could be something as simple as using personal savings to cover business expenses.

This creates various liability issues that compromise the safety of your company, including in divorce proceedings. If your spouse can prove that you blended your business finances with personal family accounts, your business becomes a marital asset.

Agreements and legal structure

Clearly, a joint venture with both names on the articles and operating agreements makes a business marital property that is subject to division. If your company is a distinct entity, however, you may have a stronger case for proving it is separate property.

You could also protect the company with prenuptial or postnuptial agreements that define the business as separate property. Naturally, you would have to have followed any stipulations in that contract.

Detailed records of your business’s finances and operations will help determine its status in a divorce proceeding. Even if the court decides your spouses deserves a portion, clear documentation can provide evidence of your contributions to strengthen your argument for how equitable distribution should proceed.

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