Married couples who go into business together can face some unique challenges, both within the context of their relationship and in property division should the marriage come to an end. The recently announced retirement of one Minnesota legislator highlights some of these concerns.
The legislator in question is one of four record owners of a business property that was pledged to secure a government loan of $500,000. One of the other three owners is the legislator's now ex-wife. In his retirement announcement, the legislator acknowledged that his divorce was one circumstance which led to the business' failure and the foreclosure.
The situation facing the former legislator plagues many small business owners. Too often, married couples decide to start a business or invest in already operating business without adequately preparing for the possibility that the business may fail or that their relationship will end. In some cases, the deterioration of the business can also have an adverse impact on the relationship. Couples who fail to plan for the orderly dissolution of the business in such circumstances may suddenly face many unexpected costs.
Untangling a failed business venture can be expensive, especially when a divorce is involved. In Minnesota, the court will determine whether the business is "marital property," that is property purchased during the marriage with the couple's joint assets, or whether it is solely the property of one spouse. The court may -- if the financial condition of the business permits -- divide the business in unequal shares based upon each spouse's financial contribution. And of course, with a failed business, the debts of the business will also be divided between the husband and wife.
No one enters a marriage or a business expecting that it will fail. Fortunately, a legal professional can work with divorcing couples who have complex asset division issues to ensure that their interests are protected throughout the process.
Source: StarTribune.com, "Leidiger announces retirement after two terms," Abby Simmons, Feb. 5, 2014