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Dividing Businesses Created Prior To Marriage Vs. Businesses Created During Marriage

Owning a business when you’re going through a divorce can be a complicated reality. Understanding state laws concerning the division of business assets during a divorce is crucial. The timing of when the business was started can have a significant impact on how assets related to business ownership are divided between spouses.

Ohio follows the equitable distribution model, aiming for a fair distribution of marital assets, though not necessarily an equal one. Several factors, such as each spouse’s contributions to a business and the length of the marriage, may influence the court’s final decision in a litigated process. In an uncontested process, spouses can reach whatever agreement they find to be equitable.

Businesses started before the marriage

In Ohio, any business started before a marriage is typically viewed as the separate property of the spouse who founded it. This means that generally speaking, the other spouse doesn’t have a direct claim to the business itself. However, this isn’t as clear-cut as it might appear. Any appreciation of the value of the business during the marriage could be considered marital property, which is subject to division.

Even if a business was started before the marriage, the line between separate and marital property can become blurred if there’s any commingling of funds or a lack of financial records. For example, if marital money was used to support the business or increased in value due to the efforts of one or both spouses, the business could be considered, at least in part, a marital asset.

Businesses started after the marriage

If the business was founded after the marriage, it’s generally considered a marital asset in the eyes of Ohio law. Both spouses have a claim to the business, and it’s subject to division in a divorce. The division can be handled in many ways, including selling the business, owning it as partners or one person buying the other out.

Professional valuation is often necessary

Valuing a business is complex. It’s not just about the revenue or the assets. Many other factors, such as the business’s goodwill, future earning potential and debts, are considered. An expert can assess these various elements to give a more accurate estimate of the business’s worth that can serve as a foundation for negotiations or court decisions.

If you own a business and are considering a divorce, or if you’re already in the process of divorcing, don’t underestimate the complexity of dividing a business asset. Seeking legal guidance concerning how your business is likely to be handled during property division proceedings can help you to determine your next steps in informed ways.


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