Business Owners | Whitten Legal

Small Business and Divorce

Rollen Quicoy — Tue, 04 Feb 2025 08:55:03 +0000

On behalf of the Law Office of Greg Whitten on Tuesday, February 4, 2025.

If you are going through (or anticipating) a divorce, what happens to a business owned by one or the other of you? What about the money in the business bank accounts? The furniture and fixtures? The ownership interests?The answers to these questions and more are critical so that you can plan and we can creatively solve potential problems in the divorce. While there is enough information to write a book, here are some of the first questions:

What Type of Business is it? LLC, Chapter C, Sub-Chapter S, D/B/A, General Partnership, Other

Was it formed before or during the marriage?
Who owns the shares/member interests, and in what percentages?
Has any ownership interest been given or assigned to anyone (including the spouse), and did that occur before or during the marriage?
Would the business still be viable if the spouse operating it ended his / her involvement?
How much money would be left over if the business was shut down, assets liquidated, and all debts paid off?
Are there personal guarantees of any business debts or contracts?

The answers to these initial questions will determine whether the business is the separate property of one or both spouses or community property. This is important because the court can only divide/award community property and can only confirm ownership of separate property.It is also essential to know that if the business is a legal entity, neither spouse owns anything “in” the business: not the accounts, receivables, equipment, furniture, etc. Rather, it is the business that owns these items. Accordingly, the court cannot award any of the business’s money or property to either spouse. However, if the business is community property, the court can award all or part of the ownership of the business to either / both spouses.

The liquidation value and value as a going concern (irrespective of either spouse’s ongoing involvement) is essential, as the business may not be worth anything to one spouse (or anyone else). Still, it may provide the livelihood of the spouse operating the business.

When we have a divorce with a business, we will explore these and more questions to be able to strategize for your best outcome.

Splitting A 401(k) In A Divorce

Rollen Quicoy — Thu, 09 Aug 2018 09:47:07 +0000

On behalf of the Law Office of Greg Whitten on Thursday, August 9, 2018.

Divorce becomes complicated the more assets a couple shares. While most couples will focus on the division of property and child custody, there is one issue many people tend to overlook: the 401(k).

A 401(k) is marital property. The spouses contribute to it and similarly to buying a home together, it becomes open for division in the event of a divorce. Dividing a 401(k) can become messy, so it is important to prepare adequately and have an attorney assist you throughout the process.

A Three-Step Process

There are three steps to divide a retirement account. First, the initial divorce decrees must explicitly order the division. Next, you and your lawyer will need to create an additional legal document known as a qualified domestic relations order (QDRO). You will need to provide this document to the administrator of the retirement account, and the document must contain details about how to divide it so that it remains in compliance with the Employee Retirement Income Security Act.

From here, the judge will need to approve and sign the order. At the end of it all, the former spouse will receive the designation of “alternate payee,” which means that he or she can receive payments from the account.

Distributing the Funds

There are several different ways a former spouse can receive payments through the account. The spouse can take money as a cash payment right off the bat or elect to receive proceeds into his or her own retirement account. Additionally, it is possible to leave the 401(k) intact until the person who owns it retires, at which point payments can come through.

Working Out An Independent Agreement

It is possible for two divorcing spouses to reach an agreement on their own for various retirement accounts. However, it would work to both parties’ best interests to still consult with a financial advisor and attorney to ensure everyone receives a fair share.