Would I lose my small business in a divorce?
The more financial success you have enjoyed during your marriage, the more you have to lose in a contentious divorce. Louisiana is a community property state, which means that you and your spouse share an ownership interest in each other’s property and income from during the marriage. You are also both responsible for the debts that you took on while married to one another, even if those debts are only in one spouse’s name.
While retirement accounts and houses may become the focal point of divorce negotiations for many Louisiana couples, your case is different because you run a small business. Can you protect your small business from division in a Louisiana divorce?
The company may not be community property
Some people already owned their business when they married or inherited it directly from family members, which means that they can largely classify its value as separate property. Those who already own a business when they get engaged may have had the foresight to draft a prenuptial agreement with their spouse.
If you designated your business as separate property or agree to very specific terms regarding how you would address it in your divorce, your risk of losing the company in the divorce is likely minimal. The same is true if you are able to negotiate a settlement with your spouse outside of court. However, the business could be vulnerable if you litigate property division matters.
Judges have a lot of discretion when dividing property
When you go to court, a judge looks at the inventory of your assets and information about your marriage to decide what would be the appropriate solution for dividing your community property. While they would likely agree to preserve a business that you rely on as a primary source of income, there is no guarantee about how they will rule in your case. They could potentially give your spouse a partial ownership interest in the business or even instruct you to sell the company in some cases.
Negotiating your own settlement is one of the more effective ways of achieving specific outcomes in the property division process. Identifying your most valuable assets early on will help you strategize to achieve a better divorce outcome.