Key Takeaways
- A family business can become a complicated asset during a divorce in Colorado, especially when both spouses have financial or professional ties to it.
- Marital vs separate business property can affect what portion of a business interest may be considered in the divorce.
- Protecting business assets in a divorce starts with accurate records, a reliable valuation, and careful decisions about the business during the divorce.
How Does A Family Business Get Divided In A Colorado Divorce?
A family business in Denver or Colorado Springs can make a divorce in Colorado more complicated because ownership, income, and family relationships often overlap. You may own the company, work for it, or have an interest in a business owned by a parent, sibling, or other relative.
One of the first questions is whether the business interest is marital property, separate property, or a combination of both. This is where marital vs separate business property becomes important.
Generally, property acquired during a marriage is considered marital property, regardless of whose name is on the title. Property acquired before marriage or through certain gifts or inheritances may be separate. However, an increase in the value of separate property during the marriage may also become relevant.
For example, if you owned a family business in Denver or Colorado Springs before getting married but its value increased substantially during the marriage, the situation may be more complicated than simply saying the business is separate property.
Establish Your Ownership Interest
Protecting business assets in a divorce starts with establishing exactly what you own and how you acquired your interest.
A careful review of the family business’s history can help determine whether the interest is marital, separate, or both. This makes marital vs separate business property a key issue in many business-related divorces.
Gather documents that can help establish the business’s history, including:
- Formation and ownership documents
- Operating, partnership, or shareholder agreements
- Tax returns and financial statements
- Business bank records
- Purchase agreements
- Gift or inheritance records
- Records of contributions made during the marriage
- Previous business valuations
These records can help show when the family business was acquired, how it changed during the marriage, and what it may be worth in Denver or Colorado Springs.
Get An Accurate Business Valuation
A family business is often harder to value than a home or investment account. Its value may depend on revenue, assets, debts, equipment, intellectual property, goodwill, and the owner’s role in the company.
During a divorce in Colorado, an accurate valuation can help determine what portion of the business is relevant to property division.
Valuation can also help address marital vs separate business property. If the family business existed before the marriage, its value when the marriage began may be important when determining how much it appreciated during the marriage.
This is why protecting business assets in a divorce may require more than looking at a tax return or estimating the company’s value.
Keep The Business Operating Normally
A divorce can create tension when spouses work together or share an interest in a family business. Protecting business assets in a divorce means being careful with major financial and operational decisions while the case is pending.
Avoid making unusual changes without first discussing them with your attorney. Depending on the circumstances, transferring ownership, selling assets, moving money, changing compensation, or taking unusual distributions could create additional issues.
Colorado’s divorce process includes restrictions on transferring or disposing of marital property without consent or a court order, although exceptions may apply, including actions taken in the usual course of business.
The goal should be to keep the family business operating normally while the divorce is resolved.
What If Both Spouses Work In The Business?
When both spouses work in a family business, the divorce may raise additional questions about the company’s future.
You may need to address:
- Who will continue working in the business?
- How will each spouse’s income be handled?
- Does either spouse have an ownership interest?
- Should one spouse buy out the other’s interest?
- How would a buyout be funded?
- How will the business operate after the divorce?
These questions can make marital vs separate business property especially important. They can also affect how you approach protecting business assets in a divorce.
In some cases, one spouse may keep the family business while the other receives other marital assets as part of the property division. The appropriate solution depends on the business, the marital estate, and the circumstances of the divorce in Colorado.
Protect Your Interest Before Problems Start
If you are considering a divorce in Colorado, start gathering relevant information before a business dispute develops. Protecting business assets in a divorce is easier when you have organized records and understand your ownership interest.
Keep copies of financial and ownership documents you are legally entitled to access. Do not hide, alter, destroy, or improperly access business records. Instead, ask your attorney what information you can obtain and how it should be preserved.
In one case, Colorado Legal Group attorney Ron Taylor helped a client uncover hidden assets during the divorce process, demonstrating why careful review of financial records can be so important when protecting your financial interests.
Protect Your Family Business With Experienced Legal Guidance
A family business can represent years of work, investment, and family history. Determining marital vs separate business property, reviewing records, and establishing an accurate value can all play a role in protecting business assets in a divorce.
At Colorado Legal Group, our experienced family law attorneys in Denver and Colorado Springs can help you understand your business interests and navigate property division during a divorce in Colorado.
If you are concerned about your family business, contact us today to schedule a consultation with an experienced family law attorney in Denver or Colorado Springs.
Joseph Cash
Attorney at Colorado Legal Group
Joe Cash is a skilled divorce and family law attorney with over a decade of experience handling high-conflict cases, custody disputes, child relocation, and complex financial matters in Denver. He is known for helping clients make sound decisions that protect both their finances and their relationships with their children.
Education: University of Colorado, Boulder
Years of Experience: 10+ years of high-level divorce experience