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Divorce and the Family Business

Divorce can be quite complicated when spouses are business partners or have an employer-employee relationship. Minnesota is an equitable distribution state, which means the court divides property in a manner it views to be fair and just, not necessarily 50-50. Here are two scenarios that illustrate the possible complexities.

  • A couple had been married several years during which the husband was the sole breadwinner and the wife raised the children. When the youngest child was old enough to start school, the wife decided to start a cottage business. By agreement, she drew funds from their savings to start the business and worked within the home to perfect the product. She never incorporated and all taxes were paid through the couple’s joint tax return. After a few years of struggling, the wife got a distributor for the product, which allowed her to outsource production to a subcontractor. The business became very lucrative. How much of the business does the husband own?
  • A husband manages his family’s restaurant and takes his wife on as a hostess where she makes minimum wage plus tips. She is engaging and has a great rapport with customers, who look forward to seeing her when they come in. She has a background in marketing and comes up with numerous ideas to grow the business. The husband adopts some of her ideas for redesigning the dining room, revamping the menu, and increasing online and social media marketing. She is never paid for any of this work. The business takes off, serving more customers than it ever had before. When the couple divorces, does the wife have an equity interest in the restaurant?

The court must consider several factors when deciding whether a spouse has an ownership interest in another spouse’s business and how much that interest amounts to. In general, one should assume each spouse has an equity interest in a business owned during the marriage unless the couple specifically designed a prenuptial or postnuptial agreement stating otherwise.

These types of property division cases are always fact-specific, so the skill and experience of a divorce attorney are critical to the outcome. If you’d like additional information about equitable distribution and its effect on your family business, schedule a free consultation with our family law attorneys at Appelhof, Pfeifer & Hart, P.A.

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  • "With Appelhof, Pfeifer & Hart, P.A., it is like having a family physician. They are all knowledgeable, thorough, comforting, and the only call I need to make for all my legal needs for many years to come. No matter what the matter, I totally trust their advice and commitment to me and my family." - J.N.

  • "Mary from APH Law helped me thru a difficult divorce. She and the entire staff was there for me every step of the way helping me on what to do next. They listened to what I wanted and helped me achieve what matter the most to me in the divorce settlement." - Dana C.

  • "I chose APH after my initial consultation with Mary. I felt my best interest would be represented. The entire process went excellent, the attorneys and staff communicated effectively and efficiently with me throughout the process as they needed to. Being new to the legal process and verbiage, they walked me and talked me through the next steps and the jargon, I felt completely comfortable and represented. I hope I never have to use legal services again but if I do I will call Mary at APH Law and know that I will be taken care of." - Jeff M.

  • "Divorce is a time of emotion and stress. Mary Pfeifer , My lawyer was professional and compassionate. She was very informative through the process. Her insight helped me in my decisions. She worked hard to obtain a settlement which was fair to both parties. Though, I hope I won't need her help again. It is reassuring to know a good person that is willing to help." - Rod S.

  • "I first came to Ms. Jacquelyn Lutz of Appelhof, Pfeifer and Hart in October of 2016. It was definitely the worst time in my life and she compassionately spoke with me about my options. Ms. Lutz thoroughly explained the laws, statutes, process and what to expect going forward. What was supposed to be one case, turned into three intricate cases that took a huge toll on me and my family. Ms. Lutz represented me in court on all three cases with a vast knowledge of the laws and how to proceed accordingly. During all three cases she kept me informed, calm, gave me resources to utilize, and (most important) gave me a realistic view of what may come next. Ms. Lutz knew each case required a great deal of knowledge and creative thinking on how to legally proceed forward with each case. My family and friends are forever grateful for the amazing representation by Ms. Lutz. I highly recommend Ms. Lutz for anyone needing or considering superb representation for any kind of family law. " - M.H.

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