Introduction
If you’re a business owner going through a divorce in Minnesota, a pressing concern is likely: Can I keep my business after the divorce? The answer depends on a number of factors, including when the business was started, how it was run during the marriage, and what both spouses contributed.
Minnesota is an equitable distribution state, which means marital property — including businesses — is divided fairly, though not always equally. That can make things complicated when one or both spouses are tied to a business.
At Martine Law, we understand the stress and uncertainty that comes with dividing a business in divorce. This blog walks you through the key issues that determine whether you can keep your business and how to protect it.
Marital vs. Non-Marital Business Assets
The first step is figuring out whether the business is marital property, non-marital property, or a mix of both:
- Non-marital property typically includes businesses started before the marriage, inherited businesses, or businesses kept separate and not commingled.
- Marital property generally includes businesses started during the marriage, or any increase in value of a pre-marriage business due to marital contributions (like shared finances, time, or labor).
Even if you founded the business before the marriage, if your spouse helped run it, invested money, or gave up other opportunities to support it, they may still have a claim to its value.
How Minnesota Courts Handle Business Division
Courts in Minnesota don’t typically want to split a business between spouses unless both were involved and want to stay involved. Instead, the court may:
- Award the business to one spouse and require them to buy out the other’s interest
- Offset the value by awarding other assets (e.g., retirement accounts, equity in a home) to the other spouse
- Order the business sold, though this is rare unless no agreement can be reached or both spouses want out
If keeping your business is important, working out a buyout or offset through mediation or negotiation is often the most efficient solution.
How Business Value Is Determined
Before anything is divided, the court must determine the fair market value of the business. This usually requires a professional valuation expert who will analyze:
- Business assets and liabilities
- Cash flow and profits
- Market trends
- Customer base and goodwill
- Ownership documents and agreements
Disputes can arise if spouses disagree on the valuation, especially when one side believes the other is undervaluing the business to avoid paying more.
A skilled attorney at Martine Law can help ensure a fair and transparent valuation process.
Can You Protect Your Business Before Divorce?
Yes — and ideally, you should. The best way to protect your business before a divorce is to plan ahead. Strategies include:
1. Prenuptial or Postnuptial Agreements
These legally binding agreements can define your business as non-marital property or limit what your spouse can claim.
2. Separate Finances
Avoid mixing personal and business funds. Keep accounts, loans, and credit lines separate to reduce commingling.
3. Ownership Agreements
Operating agreements, shareholder agreements, or partnership contracts can include clauses that restrict transfer of ownership in the event of divorce.
Even if you’re already in the middle of a divorce, an attorney can still help protect your interests using these documents.
What If Both Spouses Own the Business?
In cases where both spouses are co-owners, things can get especially tricky. You have a few options:
- One buys out the other’s interest
- Sell the business and split proceeds
- Continue to co-own post-divorce (rare but possible with a strong working relationship and legal safeguards)
If co-ownership is not an option, courts will look at who has the greater ability to run the business, who contributed more, and what arrangement is most practical.
What If the Business Is a Sole Proprietorship?
If the business is in your name only, but was operated during the marriage, it may still be considered marital property. However, you have a better chance of retaining it, especially if:
- Your spouse had little to no involvement
- The business income supports your livelihood
- The business cannot easily be divided or sold
Even then, your spouse may be entitled to a share of its value, which may have to be paid through a buyout or asset trade-off.
What About Debts Tied to the Business?
Along with assets, the court also considers business liabilities when dividing property. Debts like business loans, vendor contracts, or lines of credit may reduce the overall value, which can help balance out your financial obligations.
However, if you personally guaranteed any of the debts, you may still be liable for them after divorce — even if the business goes to your spouse. This is why legal guidance is critical.
Tax Implications of Keeping a Business in Divorce
Keeping a business in your name may also come with tax consequences, especially if you:
- Buy out your spouse’s share
- Restructure ownership
- Sell the business down the road
Consulting with a tax professional during the divorce process is important to avoid unexpected liabilities.
How Martine Law Can Help
At Martine Law, we’ve helped business owners and spouses of business owners navigate divorce with confidence. Our legal team understands the complexities of:
- Business valuations
- Negotiating fair settlements
- Drafting prenuptial and postnuptial protections
- Litigating disputes over ownership or contributions
Whether you want to retain full ownership or ensure you receive your fair share, we’re here to make sure your rights are protected every step of the way.