- How to protect your business before you get married
a. An Antenuptial Agreement (also known as a pre-nuptial agreement)
b. A pre-nuptial will carve out business as separate property
c. Ohio does not recognize post-nuptial agreements, but does recognize separation agreements
- What could happen if you did not protect your business and your marriage fails
a. Any business interests that have appreciated after the marriage or anything acquired during the marriage may be considered “martial property”
b. The value of your business interest could be considered “marital property” and Ohio divides that according to an equitable distribution analysis.
c. Any value of the business accumulated before marriage is considered your “separate property” and usually is solely awarded to you – however the duty/burden is upon the person attempting to have the property classified as “separate” to prove the same.
d. If you receive a pension or retirement from your business, the value that has accumulated during the marriage is also “martial property.”
- What if my spouse and I are both actively involved in the business and our marriage fails?
a. Ohio does not require one party to leave the business simply because the marriage is over. However, the court does encourage the parties to separate their business interests, as well as their marital interests.
b. For LLCs, this may require an amendment to the operating agreement.
- What happens to the debts in the business?
a. Debts are also divided those related to the business will be factored into the net value of the business interest that will be distributed.
- What happens to your ownership interests in the business if you die before your spouse?
a. Without a pre-nuptial agreement, the spouse may be entitled to some value of your interest.
b. If you wrote a will leaving the entire interest to anyone other than your spouse, your spouse could contest the will.
c. The Operating agreement may state what happens to membership units.
- Child Support payments /Requests for business information
a. You must comply with court orders withholding your employees’ wages
b. Make sure you do not commingle your personal income and expenses with your business expenses.
c. Keep accurate business records, the books of a business are discoverable in domestic court.
d. If you are served a subpoena for an employee’s personnel file, you may have to appear in court or hire a lawyer to quash the subpoena or put on a protective order if any of the information sought could be deemed a trade secret or confidential. The court can hold a company in contempt for failure to comply with a subpoena. Always err on the side of communication and transparency, but also with an eye for protection.
Business Valuations in Ohio
The increase in a business during the marriage can, as stated above, be determined to be marital property. The value of a business is proven in court by expert testimony. Said expert is generally selected by the lawyer and hired by the client.
An accurate business appraisal requires gathering the underlying documents and records of the business. The value of the business is measured typically both at the time of the marriage and at the time of the final divorce or dissolution hearing. Marital and separate property are also considered.
Options for a Court to Divide a Business Asset-
— If enough assets are available, one party would be awarded the business and the other party would be awarded a comparable amount.
— The business can be sold and the proceeds can be divided.
— One party could be ordered to buy out the other party- can
For more information or to contact us, go to www.lmcounsel.com.