Family businesses are often the most valuable financial assets individuals own, much more so than a home, cars, or other assets.
Whether the business was passed down from family or built from the ground up, countless hours go into running and growing the enterprise. That hard work makes success all the more satisfying.
But what happens when business owners face a divorce? Many individuals believe that their spouse is automatically entitled to half of the entire business. They believe they’re forced to work side by side with their former partner or even have to sell the business just to resolve a division of assets.
Fortunately, this doesn’t have to be the case. With a little bit of planning and understanding of Nevada divorce laws, business owners may be able to retain their family business.
Is My Family Business Separate Or Community Property?
To understand what could happen to a family business in a divorce, individuals should also understand some basics of Nevada divorce laws.
1. First, Nevada is a community property state, which means any assets, income, or property acquired or otherwise created during the course of a marriage belongs equally to both parties.
2. Second, property or assets acquired before marriage are considered separate property and are not subject to division between spouses in divorce proceedings. Furthermore, property inherited during a marriage is also considered separate property. However, separate property can also become community property if commingled with assets or equity by the other spouse during the marriage.
So what does this mean for a family business? That all depends on the circumstances of the case and how much work the other spouse put into the business.
If the family business was started before or inherited during the course of the marriage, the business can remain separate property. However, if the business grows in value during the marriage, that added valuation could be subject to division and half may need to be paid to the other spouse. Conversely, depending on how the community was compensated during the marriage, it is possible that the added valuation can be deemed to be separate property and not subject to division.
If, however, the non-owning spouse adds his or her equity (like income, work, or assets), the business may be considered commingled and also subject to division during a divorce. Family businesses creating during a marriage will almost certainly be considered community property, regardless of who puts in time and effort into the business.
How Do I Keep My Family Business In A Divorce?
It is important that a family business be properly valued under Nevada law. To do so, an expert witness is often used to calculate the value and, if there is a separate property component, it is critical that both approaches under Nevada law are used to determine whether the community should receive some value from the business or whether it has already been compensated.
Prior to marriage, prenuptial agreements are a key method to ensure one party keeps their family business. Whether the business grows or receives added valuation from the other spouse’s assets, it will be protected.
Contact A Las Vegas Divorce Attorney
With years of experience handling high net worth divorces, Shawn M. Goldstein understands the complexities of keeping family businesses in the hands of those worked hard to help them grow. Proudly serving Las Vegas, Nevada and surrounding areas.