Protecting a small business during marital asset distribution

When a Tennessee family or couple or just one member of the family unit owns a small business, a subsequent divorce can become very complex. This is because there is now an asset that may be subject to distribution along with the other assets of the marriage.

What business-type assets owned by a party that can fall within the confines of business ownership subject to distribution are many, including the following:

  • Corporations
  • Partnerships
  • Professional practices
  • Limited Liability Corporations
  • Sole Proprietorships
  • Franchise or agency agreements

It is important for parties to a divorce to get any business that is a marital asset properly valuated. A professional business valuator performs the appraisal. To slack off on this part of the divorce can easily mean an unfair division of marital property later.

According to, a party may lose all or much of his or her small business, even the party who started and ran the business, when divorce hits.

Factors that can affect how much business one can keep

Some realities to consider in order to protect one’s later share of this kind of marital asset include the following:

  • The more a spouse contributes to the business, the more likely he or she will get a bigger share
  • The less an owner takes in salary over the years, the more the other spouse may get in distribution later
  • It is possible to agree to give up other marital assets, to retain more or all of the business
  • A party may use the neutral court-appointed appraiser, but follow up with one’s own for a second expert opinion

Other traditional tools of asset protection

In addition to the facts noted above that one can use to plan in advance, there continues to be the exceptional standard tools that can affect the distribution of assets later if a divorce occurs. These include pre-nups and post-nups as well as buy-sell agreements and whole life policies. Proper early planning, with an eye for what can go wrong with a marriage, may be the best practice to preserve a small business from the destruction of divorce.