How Is a Family Business Divided in a Michigan Divorce?

Divorce is challenging enough without the added complexity of dividing shared assets. When a family business is part of the marital estate, the stakes are even higher. This involves emotional and financial considerations, as well as the long-term viability of the business. Understanding Michigan’s laws surrounding the division of marital assets, particularly family businesses, is crucial to protecting your interests and making informed decisions during this life-changing event. The Van Den Heuvel Law Office is here to guide you through this critical process. 

Michigan’s Equitable Distribution Law

Michigan follows the principle of equitable distribution for dividing marital assets, which means property is divided fairly, though not necessarily equally. The court considers what is just and reasonable based on the specific circumstances of each divorce. Family businesses, whether small or large, often fall within the scope of marital property, particularly if both spouses contributed to its success or it was established during the marriage. 

When Is a Family Business Subject to Division?

A family business can be considered marital property under several conditions. For example:

• The business was started or acquired during the marriage. 
• Both spouses contributed to its growth. 
• Marital funds were used for operational or growth purposes. 
• Ownership documents or other assets became commingled with marital property. 

Even a pre-marital business or one initially treated as separate property may become partially subject to division. Any increase in the business’s value during the marriage often falls under marital property if it resulted from the efforts of one or both spouses. 

Key Factors in Dividing a Family Business

Business Valuation

A crucial step in dividing a family business is determining its value. Professional appraisers consider several factors, including the business’s income, market conditions, assets and liabilities. A proper valuation ensures a fair division of business assets, protecting both parties from future financial disputes. 

Ownership Stakes and Contributions

Every divorce case considers the specific roles that each spouse played within the business. Did both parties directly manage the company? Did one spouse take on a supportive role to allow the other to focus on running operations? Was the business’s success due to joint efforts or largely one party’s work? These considerations influence how the court will divide the business. 

Division Methods

Once the value of the business is established, there are various options for its division, including:

• Buyout: One spouse buys the other’s interest, retaining sole control of the business. 
• Co-ownership: Both parties continue running the company, an option that requires strong communication and mutual respect. 
• Sale of the Business: If neither party wants to continue ownership, the business can be sold, and the proceeds divided. 
• Profit Sharing: One spouse maintains control while agreeing to pay the other a portion of future profits. 

The most suitable option depends on factors such as the business’s marketability, the financial needs of each spouse and their ability to collaborate post-divorce. 

Protect Your Business and Future

Dividing a family business during a divorce is complex, but you don’t have to face it alone. At Van Den Heuvel Law Office, our seasoned attorneys bring over three decades of experience in navigating multifaceted divorce matters, including business asset division. We work tirelessly to protect your rights and the interests of your family business. Contact us today to discuss your situation and secure the skilled representation you deserve. Your business and future are worth fighting for.