You built your business, and now a divorce has you wondering what will happen to it. In Georgia, a business is not automatically split in half. Instead, the court generally decides whether it is marital or separate property, determines its fair market value, and divides the marital portion under equitable division principles.
Is your business marital or separate property?
A business you started during the marriage is generally marital property, while one you started before the marriage is generally separate. However, if the business grew in value during the marriage because of your efforts or your spouse’s, that active appreciation is marital property subject to division.
Growth caused only by market forces generally stays separate. Mixing personal and business funds, known as commingling or transmutation, can leave the business partly marital and partly separate unless you can clearly trace the separate contributions under Georgia’s source of funds rule.
How is the value of your business determined?
A court generally needs to know what your business is worth before it can divide it. Appraisers or forensic accountants often review financial records to calculate its fair market value using asset, income or market approaches. Under Georgia law, valuation must distinguish between enterprise goodwill and personal goodwill.
Enterprise goodwill is the transferable value of the company, and it is marital property. Personal goodwill is your personal reputation and skill, and it is separate property excluded from division. Each spouse may present a different number, so keeping accurate financial records organized and ready may help.
How does a court divide your business?
Georgia divides marital property equitably, which does not always mean equally. A judge may consider the circumstances of your marriage and each spouse’s situation. Often, the spouse who runs the business keeps it, and the other spouse receives other assets or a payout for their share. A court can order a sale as a last resort, or the spouses may agree to continue owning the business together.
Can an agreement change how your business is divided?
An agreement can change the outcome. A prenuptial or postnuptial agreement may keep your business and its future growth separate, and you and your spouse can also settle the issue yourselves. The court generally includes a settlement in the final decree.
Georgia courts enforce these agreements only under a strict legal test, which looks for full financial disclosure, no fraud or duress, fair terms and no changed circumstances that make enforcement unfair.
Every situation depends on its own facts. It can help to speak with a family law attorney about how Georgia law may apply to you.