Business division in an Oregon divorce

May 10, 2013

In a successful small business, often both spouses play an active role. A wife who runs a small law practice may ask her CPA husband to assist with payroll and accounting. Together they may grow the business and bring on additional staff. A larger family-run timber operation may incorporate a spouse into the business in sales as the operation grows. The spouse may close large sales that lead to expansion.

But what happens if the marital relationship breaks down and the couple seeks a divorce? What happens to a business that both spouses have contributed to and helped build over the years?

The divorce of Harold and Sue Ann Hamm illustrates the difficulties of dividing business assets. The Oklahoma couple both worked to make oil company Continental Resources a success. Sue Ann, a lawyer and economist, held several high-profile positions at Continental. Over the couple's 25-year marriage, the company has grown tremendously.

The outcome of the divorce case will have an impact on the company. Harold currently has a controlling interest in the company. Under Oklahoma's "equitable distribution" standard, Sue Ann may receive a portion of the company, which could affect investors and operations.

The Oregon property division standard is a bit different, but some of the implications on a business are the same.

Oregon standard in property division

Business division in divorce is complicated and usually requires the assistance of a neutral CPA to assist with valuation. Avoid a CPA who may be seen as sympathetic to one party. Having an idea of the proper value of the business is important for settlement negotiations. The value placed on the business will affect the total property award.

Oregon statutes place property into two categories. The broader "marital property" category includes real or personal property the parties possess at the time of the divorce. With this first category, it does not matter when the property was acquired. Marital property distribution must occur in a manner that is "just and proper in all circumstances."

The second subset of property, "marital assets," is marital property that either one spouse or both acquired during the marriage. With marital assets, there is a presumption of equal contribution. This means that usually the property will be divided equally between the spouses. In certain cases, the distribution may not be equal, but it must meet the just and proper standard.

For a business started during the marriage, the equal division standard could prove difficult. Strained relationships following a divorce may mean that the couple may no longer want to work together. A negotiated property settlement, however, may offset an interest in a business with a larger share of equity in a home or retirement accounts. One spouse in effect buys out the business interest of the other. This may be a better option for some business owners.

Going into business with a spouse can be rewarding, but when a divorce is on the horizon, contact an experienced family law attorney. Decisions made during the divorce could affect whether your business continues to thrive going forward.

Article provided by The Law Office of Thomas M. Brasier
Visit us at www.brasierlaw.com