This is the next post in my series discussing how Nevada’s community property laws impact the divorce settlements of Las Vegas residents. My last article explained why an uncontested divorce often makes the most sense for couples whose main focus is property distribution. In this discussion I will explain how the value of a business is divided during a divorce case.
Nevada’s divorce laws may consider the increase in a business’ value to be community property
There are many different ways in which a person can structure their business. If the company is structured in such a way that all profits from the business goes to the individual then any increase in the business’s worth is often considered community property. However, if a business is structured as a corporation then community property laws would only extend to what the business owner actually accumulates in his own name. This may include salary, retirement funds, stock options, shares of stock, etc. However, the corporation’s bank account would not be part of the community.
When a Nevada couple owns a business then several different options exist in regards to dividing the company. If only one member of the couple is involved in running the business then it may make sense for that person to buy the other person out. For example, if the business is worth $500,000, then the person who wishes to retain ownership may give the other spouse $250,000 in cash or other assets. A second option, is for a percentage of the monthly business profits to be incorporated into part of a spouse’s alimony payments. If the couple ran the business together then it is generally not feasible for the two people to continue working together. When possible it may may make sense to sell the business and split the proceeds equally amongst both parties.
A premarital agreement can prevent complications when one Nevada spouse owned a business prior to marriage
Owning a business can become particularly complicated when one spouse owned the company prior to a Nevada divorce. When one person has spent years and their own money building up a company then they are often worried about protecting their life’s work.
Other times a person has a business partner whom has been involved in the business long before the marital partner enters the picture. In this event, it is often in the best interest of everyone to sign either a premarital or post marital contract ensuring that the business itself is not considered community property. The prenuptial agreement should ensure that the non-business owning partner does not invest personal money into the business or loan the business money for expansion or growth. A premarital contract should very clearly outline a settlement proposal for the non-business owning spouse in the event of a marital dissolution. The settlement should take into account what the business is worth and prevent the partner from actually claiming an ownership stake in the business. This type of agreement can protect the business from having to be dissolved in case of divorce and can avoid costly attorney fees. Without a premarital agreement, a forensic accountant may be needed to wade through the business’s financial records in the event of a divorce trial.
If you or your spouse own a business, divorce can become messy quickly. Contact a qualified Las Vegas family lawyer today to learn more about protecting your business during divorce.