How Connecticut Courts Deal with Family Businesses in Divorce

Family business owners can pour their lives into their work. But sometimes the strain of running a business, along with other life stresses, can push a marriage to the point of divorce. When that happens, you will certainly wonder how Connecticut courts deal with family businesses in divorce. Working with an attorney familiar with both divorce and business law can assure you reach a fair and equitable resolution to your marital property and family business.

How Connecticut Courts Address a Family Business in Divorce

Connecticut is an “all property state.” That means all the assets owned by either party, including any business assets, are subject to equitable distribution by the courts. Family business interests are part of the marital estate no matter which party acquires the interest, or whether it was owned prior to the marriage or accumulated during the marriage. The Court’s authority also extends to the parties’ debts, including personal guarantees on business obligations.

That said, there are still arguments to be made about the fair distribution of business assets. The Connecticut courts have broad discretion in how they will divide assets between the parties. There are several factors that the Connecticut courts will consider in deciding a fair and equitable property distribution:

• The length of the marriage
• The cause for the dissolution of the marriage
• The parties’ age, health, station, and occupation
• The amount and sources of income as well as earning capacity, employability, and vocational skills
• The liabilities and needs of each party
• The parties’ opportunities to accumulate new assets and income
• The contribution of each party to the acquisition, preservation and appreciation of the value of the assets

The ownership, management, and operations of a family business can tie into many of these factors. It is up to you and your Connecticut divorce attorney to advocate for a fair property division that allows your business to continue, even after the marriage has ended.

Valuing a Business for Divorce

Often, one of the most challenging aspects around a business for divorce is establishing its value. Often, a business owner can either vastly undervalue or over-estimate the value of a business. This is natural. When a business owner is heads-down in the day-to-day operation of the business, it may be hard to see its value objectively. For this reason, whenever there are business interests involved in a divorce, it is wise to get an expert to do a business valuation, establishing the fair market value of the business asset, and its debts. Doing this earlier in the divorce process can facilitate negotiations and result in property settlements that prioritize your business’s interests.

How the Organization of Your Business Can Affect Division in Divorce

The mechanisms of dividing a family business in divorce depends, in part, on how the business is organized, and your share in ownership. If you are operating your business as a DBA (“Doing Business As”) or sole proprietorship, you are your business. This means that, while business equipment, assets, and inventory may be divided, the actual ownership interest is more challenging. However, dividing an LLC, C-corp, or S-corporation in divorce can be easier.

While few ex-spouses would agree to continue to work in their businesses together, stock interests and business ownership can be divided between the parties. That is, unless there is a provision in your partnership agreement or membership agreement that requires business assets to be bought back if awarded to a former spouse in divorce. That is why you should work with a Connecticut divorce attorney with knowledge of business law and structures to carefully review the business documents and fully understand the terms the business operates under.

Protect Your Family Business in a Connecticut Divorce

Your family business is your legacy. Do not let a divorce close its doors. The family law attorneys and business lawyers at Lawrence & Jurkiewicz can help you demonstrate the value of your business as a going affair, and advocate for a fair and equitable distribution of assets that keeps the company going. We represent clients in Hartford and Litchfield County who are dealing with difficult issues like divorce. To schedule a confidential consultation to see how we can help you, please contact us today online or at 860-264-1551.