One thing that occasionally complicates a divorce is when a spouse has an ownership interest in a non-marital business. Countless hours of hard work have gone into the business, there are stocks and ownership interests involved, or perhaps one spouse has control over the business and the other has none. There are several important situations to consider when you are going through a divorce and business ownership is involved. Some of these important implications are addressed below.
Contribution and Reimbursement
All property that is acquired by either spouse during a marriage is presumed to be marital property. This includes income generated during the marriage, even if the income is generated from working at a non-marital business. For example, if a husband is working at his non-marital business and paying himself a salary of $100,000 per year, his salary is marital property.
When a spouse contributes personal effort during a marriage to non-marital property, such as a non-marital business, the efforts may also be deemed a contribution from the marital estate to the non-marital property. The value of these efforts and contributions, if in the form of retained earnings or assets, can be subject to reimbursement to the marital estate, particularly if the contributing spouse has not been reasonably compensated. So, if your spouse is paying him or herself a $50,000 salary, but the reasonable salary for the work he or she does is $100,000, the marital estate has a reimbursement claim for the difference.
Finally, it is important to note that only the appreciation of non-marital property resulting from significant personal efforts of the spouse are subject to reimbursement to the marital estate. This means, for instance, that if one spouse has $100,000 in an investment account before the marriage, and at the time of divorce the account is worth $200,000 due solely to favorable market conditions, the marital estate is not entitled to $100,000 reimbursement even though the appreciation occurred during the marriage.