In Tennessee, divorces can be more challenging when one or both spouses own a business. A corporation is legally treated as a person, with statutes that define what happens to the company in the event of a marriage dissolution. If one spouse is an employee, they might think that they have a right to actual legal ownership of the business, although this may not be the case.
If you or your ex-partner own shares in a business, it is crucial to reach out to an experienced attorney for help with the divorce process. At Yates & Wheland, our legal team can explain the impact of divorce on a business in Chattanooga and represent your best interests.
If a spouse has an interest in the value of the business at the time of their divorce, the court will decide whether that ownership is marital property. The other spouse is entitled to a fair percentage of that ownership interest if it is considered marital.
In many states, marital property is divided 50-50. However, Tennessee is an equitable distribution state, so a non-owning spouse in Chattanooga could be entitled to more than 50 percent of the ownership interests depending on the situation. If the spouse has been actively involved in running the company and has contributed to its best interests, the court might award them some of the ownership interests as well as the value of the business.
A business may be considered marital property if it was started and developed after the parties got married, using marital money. Although uncommon, the courts have the authority to split the business up between the divorcing parties. The easiest way to deal with a business in a divorce is to determine the value of the spouse’s ownership interest, and then assign the non-owning spouse their percentage of that interest.
There are many factors and considerations in determining a company’s worth. The valuation process will depend on whether it is a service or production business. For instance, the value of a production business will need to take inventory and the cost of goods into account. A skilled local attorney could advise divorcing business partners on the impact of various factors on the value of their company.
Certain employees may be affected by a divorce between business owners. One common scenario is for one spouse to start a business and employ the other spouse at the company. Sometimes, the employed spouse will be contributing a lot to the business but have no legal ownership interest in it. In this case, the employed spouse and their attorney must prove to the court exactly what they contributed to the business.
Another potential issue is if the business owning spouse wishes to fire the employee spouse. If the employee spouse is performing well, employment laws may be implicated for their termination without cause. Although Tennessee is an at-will employment state, the employee spouse can still bring legal action, arguing that they were only terminated because of the divorce. This can negatively affect the environment and culture of a company, so it is crucial for parties to consult a Chattanooga lawyer on how their divorce may impact employment.
Unfortunately, running, owning, or working at a business with your ex-partner can complicate the divorce process. As such, it is essential to seek legal counsel to guide you through the legal complexities and preserve your company’s success. Speak to an attorney at Yates & Wheland about the impact of divorce on a business in Chattanooga. Call our firm today to set up a consultation.