How will divorce affect my business assets in Louisiana?

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R. Scott Buhrer - Family Law - Super Lawyers

Answered by: R. Scott Buhrer

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Business law and family law can intersect in unique ways in Louisiana, which is a community property state. In community property states, all “community assets,” regardless of how they are titled, are subject to equal division between spouses. The business itself is rarely in danger of being split between you and your ex; what is at issue is the value of the ownership interest in the business that was acquired while you were married.

It is likely that if you started your business during your marriage and community funds were used to fund any of it, it will be considered community property. If you started your business using only separate funds or assets during your marriage, a strong argument can be made that the business is your separate asset. However, any increase in the value of your business during the marriage that is due to your uncompensated or undercompensated management of the business may be seen by the divorce court as a community asset subject to division between you and your spouse.

In all likelihood, you will be allowed to retain ownership of your business, even if it is determined to be community property. However, your spouse will generally be entitled to receive assets of equal value. If there are no other assets of equal value, you may owe your spouse an equalizing cash payment which can often be paid over time, with interest.

It is essential to work with a family law attorney experienced with complex community property partition cases and law. Such attorneys often have access to a network of accounting and appraisal professionals who will assist in determining the value of your ownership interest and its status in your divorce proceedings.

The Potential Impact Of Divorce On Day-To-Day Business Operations

A related question to the fate of your business assets during a divorce is how that process will impact the operations of a family-run business and its daily operation. In almost every case, one spouse is the manager of the business and has a fiduciary obligation to keep the business running in the same manner that it was managed during the marriage.

Pending the partition of community property, Louisiana law provides that the shareholder/member/manager of the business continue to operate and manage it. If you and your spouse both work at the business, it is common for the spouse with less managerial responsibility for running the enterprise to relinquish their position, just as divorcing spouses with children rarely continue residing under the same roof and trying to co-parent in the same home.

Prenuptial Agreements And Business Asset Partition

If you are not married or contemplating marriage, one option for protecting the value of your ownership interest in your business is to address the topic in a prenuptial agreement. Even if you have already established your business with your own funds before a marriage, the advantage of this strategy is that it may reduce some of the uncertainty of how your business might be viewed during the divorce. Seek a qualified attorney to help you draft a prenuptial agreement that will hold up in court.

Your Business Is Valuable  A Lawyer Can Help You Protect It During A Divorce

Regardless of whether you have legally protected yourself with a “prenup”, are contemplating divorce or are involved in an ongoing divorce proceeding, a family law attorney well-versed in Louisiana’s community property partition and business laws can offer advice on the best course of action for preserving your enterprise and protecting your interest in it if your marriage comes to an end.

Disclaimer: The answer is intended to be for informational purposes only. It should not be relied on as legal advice, nor construed as a form of attorney-client relationship.

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