When you and your spouse own a business together and decide to divorce, dividing that business can be complex. The same is true if you built a company during your marriage. Connecticut follows equitable distribution principles. This means the court aims for a fair division of marital assets, including your business.
Is a business marital property?
The first step is identifying all assets owned by either spouse, as the court has the authority to divide all property regardless of when or how it was acquired. Connecticut is an all-property state, which distinguishes it from states that only divide property acquired during the marriage. Courts generally have the authority to divide any business interest held by either spouse at the time of divorce. This applies no matter when or how you obtain it.
Even if you owned the business before getting married, Connecticut courts may still include it in your marital property. Unlike some states that protect assets from before marriage, Connecticut allows judges to consider your entire business when dividing property. This includes its value from before your marriage.
The court may give the business entirely to you or your spouse, or split it between both of you. This depends on factors like how long you were married and what you and your spouse each did to help the business grow. Once the court establishes that a business interest is subject to division, determining its worth becomes the next critical step.
How are businesses valued?
Before a business can be divided, its value must be determined. This process often requires hiring a professional business valuator who can assess the company’s worth based on assets, revenue, market position and future earning potential.
The valuation process can be difficult and may involve examining financial records, analyzing industry trends and considering the role each spouse played in the business’s success. Different valuation methods can produce different results, which sometimes leads to disputes between divorcing spouses.
How are businesses divided in a divorce?
After valuing a business, you and your spouse have several options. One spouse could buy out the other’s interest, allowing one person to retain full ownership while compensating the other with cash or other marital assets. Alternatively, you may continue co-owning and operating the business together. You may also sell the business and split the proceeds with your spouse.
Your business represents your future
The business you built carries both financial value and personal significance, and the decisions you make now may affect your professional future. Knowing your rights under Connecticut’s all-property approach could help you pursue a fair outcome after divorce, potentially making it easier to keep your business strong after separation.