No divorce is an emotionally or legally simple matter, but for a business owner, it’s often uniquely complex. You’ve worked hard to develop your business, and now face the Colorado divorce process. It’s natural to have concerns about what will happen to your business once the divorce becomes final. For Colorado business owners, a crucial question is: How do Colorado divorce courts handle divorces between spouses when one or both spouses own a business?
A Denver divorce lawyer helps you navigate this question within the unique circumstances of your case.
Colorado’s Divorce Laws for Property Division
Colorado is not a community property state requiring a strict 50/50 division. Instead, under Colorado 14-10-113, the law states the following:
“The court …shall set apart to each spouse his or her property and shall divide the marital property, without regard to marital misconduct, in such proportions as the court deems just after considering all relevant factors…”
In other words, spouses must divide their marital property in a way the courts deem fair and equitable, if not precisely 50/50. This allows spouses to negotiate a settlement agreement, often with the help of a professional mediator, business valuation and financial forensics experts, resulting in a low-conflict, uncontested divorce. If insurmountable disputes arise, the process becomes a contested divorce, requiring both sides to present their arguments to the judge in court.
Understanding Marital Property For Business Owners
Before considering how to fairly divide a business, it’s important to understand Colorado’s marital property law. Under this law, spouses may retain their separate property. Separate property includes everything one spouse owned before their marriage, inherited during the marriage, or received as a gift during the marriage. In contrast, marital property includes all accounts, real estate, household items, vehicles, and businesses acquired during the marriage, regardless of whose name appears on the account, title, deed, or business.
If one spouse owned a business before their marriage, it may remain their separate property if they protected it with a prenuptial agreement or took steps to prevent commingling. Co-mingling assets occurs when one spouse invests time, talent, or money into another spouses property or business, giving them the right to claim a share of the property or business’s increased value. In some cases, a spouse may also have a right to a share of the other spouse’s separate business if they put aside their own career goals to care for the home and children in order to support the other spouse’s ability to develop or improve their business.
What Are the Possible Legal Remedies for Dividing a Business During a Divorce in Colorado?
The first step in dividing a business during divorce is performing a thorough valuation of the business. Often, each spouse hires their own valuation expert. Once a Colorado divorce lawyer with experience in divorce for business owners has a clear understanding of the business’s value, they may recommend one of the following methods of dividing the business fairly:
- Negotiating with the other spouse to exchange their share of the business for something of equal value, such as the marital home, vacation homes, investment accounts, or other assets
- Propose a buy-out where one spouse purchases the other spouse’s share of the business
- Continuing to co-own the business if both spouses are willing to communicate and compromise effectively
Sometimes, each spouse’s valuation of the business conflicts with the other’s, or divorcing business owners cannot agree on an acceptable means of dividing the business, resulting in a prolonged legal dispute.
A family law attorney in Denver with experience in this area is the best ally to represent your best interests throughout the process.