Maryland spouses who go into business together never think about what could happen if they choose to separate. It can be difficult to figure out the ins and outs of what will happen to the business as you’re going through a divorce.
What usually happens to the business
If both spouses’ names are on the ownership paperwork for the business, then the business is considered a joint – or marital – asset. This means that it will have to be split one way or another in the divorce.
As a part of the process, the business is valued by a third party. From there, it’s up to the couple and the court to decide how they’ll split the business.
It’s the court’s job to make things fair and equitable unless the couple can come to a mutual agreement. If no agreements can be met, the court might order the business to be sold and the profits to be split between the couple.
Transferring ownership of the joint business
The spouse who is leaving the business will sign transfer paperwork stating they relinquish their rights to the business and future profits. It’s up to the remaining business owner to ensure this paperwork addresses everything they want it to.
The business owner will want to make sure that the paperwork clearly states that the leaving business owner has no right to future profits. This paperwork should also cover dividends, retirement accounts, and health insurance coverage.
The business owner might also want to consider non-compete clauses. If there’s significant intellectual property in the business, a non-compete contract will prevent your ex-spouse from working for a competitor immediately after they leave the joint company.
Protecting your rights as the leaving business partner
It’s important to review all of the transfer agreements carefully as the leaving business partner. You’ll want to make sure that any non-compete contracts still leave room for you to find work in your field.
It’s also important to consider release paperwork and insurance that would protect you from any liability related to the company. This will protect you from legal action and any responsibility for the business.
Splitting the business can be hard and very emotional. It’s important to protect your interests and be willing to negotiate calmly when needed.
