If you or your spouse owns a business, a divorce can feel especially complicated. The business may represent years of hard work, significant personal investment, and your primary source of income. So what actually happens to it when a marriage ends in Massachusetts? The answer depends on several factors, and getting it right matters.
Property Division Laws in Massachusetts Divorce
Massachusetts is an equitable distribution state, which means marital property is divided fairly, though not necessarily equally. A judge has broad discretion to divide assets in a way that is just given the circumstances of each spouse. Factors courts consider include the length of the marriage, each spouse’s contributions, their respective earning capacities, and their needs going forward.
Nearly all assets acquired or grown during the marriage are considered marital property in Massachusetts, including a business or its increased value. Even a business started before the marriage may be subject to division if it grew significantly in value while the marriage was intact. That is why business owners need to understand exactly how their business will be classified and valued.
How Does Business Division Work in a Divorce?
Courts generally do not force a business to be sold or split in two. Instead, common outcomes include one spouse buying out the other’s share, offsetting the business value with other marital assets such as the family home or retirement accounts, or in some cases, continuing to co-own the business post-divorce. The goal is to account for the business’s value in the overall division of assets without dismantling what the spouses built together.
Which outcome makes sense depends on whether one spouse has been actively running the business, how liquid the marital estate is, and what each party wants going forward.
Understanding How Business Value Is Calculated
Before a business can be divided, it has to be valued. Business valuation in a divorce typically involves a forensic accountant or certified business appraiser who examines financial records, revenue, liabilities, assets, and future earning potential. Accepted methods include the income approach, the asset approach, and the market approach.
Common Issues to Navigate When Spouses Co-Own a Business
When both spouses have been involved in running the business, things get more layered. Ownership percentages, salary disputes, business debts, and who will continue operating the company all need to be addressed. There is also the risk that one spouse may attempt to underreport income or undervalue assets, which is why independent financial experts are so important.
Disputes over business valuation are among the most contentious issues in divorce. The earlier you start gathering financial documentation and working with an attorney, the better positioned you will be.
Get Help from a Trusted Massachusetts Divorce Attorney
A family business is often a couple’s most valuable and most complicated asset. At the Law Office of Heather M. Ward, our Massachusetts divorce lawyer understands the financial and emotional stakes involved when a business is on the line. We work closely with clients to pursue fair outcomes and make sure nothing is overlooked. Contact us today at (617) 903-8955 to get started, or reach out using our online contact form.