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Ways to protect your business from property division

On Behalf of | Jan 11, 2024 | Family Law

A family business might represent someone’s only source of income. Business ownership can also play an important role in someone’s sense of self. Especially if they started a professional practice after attending school for years or took over the family business, the company that they run may be important to the person. Yet, if a business owner divorces in Arizona, the company that they own and operate could potentially be at risk of division. The community property approach to assets used in Arizona can make almost any property that people obtain during the marriage and their income subject to division.

If someone started the business during the marriage or used marital income to develop or improve the company, then their spouse might reasonably be able to claim an interest in the company and a right to share in its value during a divorce. How can a business owner act to protect the business that they own and operate during Arizona divorce proceedings?

By showing that it is a separate property

Someone may have already owned a business when they got married, which would theoretically protect the organization from property division in the event of a divorce. That may also be an option if someone inherited the company from family members. Both inherited assets and property owned prior to marriage remain separate property in the event of a divorce in many cases. Reviewing financial documentation could help someone prove that the business they run should not be part of their marital estate.

By negotiating with a spouse

People preparing for Arizona divorces have almost no control over what a judge might do if they litigate. Judges use their own discretion when deciding what is an appropriate way to divide marital resources in an Arizona divorce. They might grant one spouse partial control of the business or force someone to liquidate the company or some of its holdings to compensate their spouse. The best way to ensure control over the terms set for property division is to commit to negotiating a settlement with a spouse.

Some people even specifically attend divorce mediation so that they can resolve disagreements about what property they need to divide and how they should split it in the divorce. Someone hoping to retain a valuable asset like a business or professional practice may need to prepare to make concessions in other areas of the divorce to secure their spouse’s approval for a property division settlement.

Identifying the assets that are most important to someone’s financial future may help them approach the property division process more rationally and achieve a better outcome during an Arizona divorce.