Dividing a Business During a Pennsylvania Divorce

 If you’re reading this page, you’re likely worried about what will happen to your business during your divorce. You likely know that your spouse is entitled to some of the marital property you accrued and this could impact your business. In this article, the Philadelphia divorce lawyers at The Law Offices of Lauren H. Kane will discuss how the courts handle businesses during divorce.

Is the business part of the marital estate? 

This is the fundamental question. Does your business belong to you separately, or is it part of the marital estate? Under Pennsylvania law, assets and debts that were obtained by you or your spouse before the marriage took place are individually owned by the spouse. In most cases, assets obtained during the marriage are considered a part of the marital estate. In some cases, an asset that was originally the separate property of one spouse can become marital property over time.

The general test then is whether or not your business was formed during or before the marriage. If it was established before the marriage, was it ever converted into marital property? If you used marital funds to support the business, or your spouse was involved in the business’s operations or growth, then it may be converted to marital property.

If you formed the business during the marriage, it is initially considered marital property. Even if your spouse does not technically own any part of the business, your spouse will share an ownership interest. The only way around this is with a prenuptial or postnuptial agreement. Most individuals do not take this step.

If the business was established before the marriage took place, your spouse may have a claim against the increased value the business made during the marriage. In that case, it would help to get a business valuation for your divorce to determine how much of the business your spouse is entitled to.

Factors determining whether the business is a marital or individual asset 

The court will take into account several factors when determining whether or not a business is a marital or individual asset. These include:

• When the business was formed
• How long between the business’s formation and the beginning of the marriage
• Whether the business was successful before the marriage or became more successful after the marriage
• Whether your spouse was involved in the formation of the business
• Whether your spouse contributed to the business’s operations or growth
• How the value of the business changed over time

The court will consider each of these factors when determining whether a business is or is not considered marital property.

Talk to a Philadelphia, PA Divorce Lawyer Today

 The Philadelphia family lawyers at The Law Offices of Lauren H. Kane represent the interests of business owners during their divorce. Call our office today to schedule an appointment, and we can begin addressing your concerns right away.