The Impact of Divorce on Small Business Owners in Georgia


Divorce courts in Georgia may divide your business. Divorce can destroy many business owners’ hard-earned success.

How Does Divorce Affect Small Business Owners in Georgia?

While considering a divorce, many business owners worry about how it will affect their investment. In addition, it is not easy to comprehend assets that may be subject to division upon divorce. In a Georgia divorce, the law evaluates both marital and non-marital assets, which also applies to businesses.

While your business may be your most valuable asset, having an ex-spouse as a business partner may pose a threat. In Georgia, any business started during the marriage is subject to equitable division upon divorce. A business started before the marriage is also subject to equitable division if its value rises due to both spouses’ efforts.

According to Georgia law, a business is subject to equitable division if the law considers it marital property. If the business is separate property, the law exempts it from such division.

Reviewing your business’ circumstances is critical during a marriage annulment. A divorce attorney can help you strategize how to protect your business in case of divorce.

How Does Georgia Property Division Law Work?

Georgia defines marital property as anything acquired by either spouse during the marriage, regardless of its title, such as real estate, stocks and bonds, cars, income, and some insurance policies. Generally, separate property includes property acquired before marriage, gifts, inheritances, and items agreed to as separate property between you and your spouse.

Georgia state divides marital assets using the equitable distribution model during divorce proceeds. This means the marital property is divided fairly, in accordance with “equitable” principles. As a result, all marital assets, including family businesses, are divided according to each party’s contribution. On the other hand, a separate property remains with its original owner after a divorce.

Additionally, a business where a partner’s contribution is taken into consideration during divorce proceedings can result in the separate property becoming marital property.

Is a Business Marital Property in Georgia?

Georgia law defines a small business as a business that is independently owned and operated with up to 300 employees or up to $30 million in gross receipts per year.

Most businesses, including partnerships, LLCs, professional practices, and corporations, are considered marital assets. Thus, they are subject to division as any other marital asset.

However, if one spouse owns the business before marriage, it usually remains part of the spouse’s personal property after the divorce. The court can make exceptions if the value of the business increases due to the other spouse’s involvement throughout the marriage.


How to Divide Business Assets During a Divorce in Georgia?

In the event that the court determines that the other spouse owns a substantial stake in the business and that it is a marital asset, an expert may need to analyze the business’ financial records. Afterward, the business will be valued, and ownership interests will be determined. Three methods can be used to value a business: income and capitalized earnings, cost-based method, and market approach.

The court will then award each spouse a portion of the business based on the circumstances. Before making a decision, the Georgia court considers the following:

  • Separate assets and each spouse’s financial status

  • The amount of alimony paid to a spouse

  • Each party’s contribution to the business 

  • The reason for the divorce

  • The length of the couple’s marriage

  • Each spouse’s contribution to the business

How Do Georgia Divorce Proceedings Treat LLCs?

Limited liability companies (LLCs) and limited liability partnerships (LLPs) are business management structures that define the decisions partners make and protect their owners from personal liability for debts and liabilities. By establishing an LLC, a member protects their assets and gives them a legal identity from that of marital property. Although the LLC may protect your assets from creditors, it does not cover your monetary stake in the business during a divorce.

During a divorce, a spouse’s specific ownership interest in an LLC is split like any other marital property. This is because LLC owners are “members,” and they own membership interests which are their personal property. So, in a divorce, a family court can equitably divide a membership interest between an LLC member and their spouse.

Your divorce lawyer must prove that the LLC business is separate from your marital assets to protect your financial stake. Additionally, your lawyer must prove that you did not invest marital assets or income in your business, so it is a separate entity.

How Can an Attorney Help in Business Distribution During a Divorce in Georgia?

In most divorces, the spouses determine property division, child support, and custody. While some couples may not follow equitable distribution laws, others may not be able to reach a divorce agreement at all. It may result in a contentious divorce requiring a court ruling or mediation. The best course of action in such situations is to engage a divorce attorney to assist with the process.

In order to protect your best interests, your attorney will help you negotiate with your spouse whether you want to split the business or buy out your spouse. Depending on your circumstances, your attorney can help you prove the following:

  • You have a postnuptial or prenuptial agreement that specifies the terms of how your assets will be divided in case of a divorce

  • You got the business as an inheritance from your family

  • The business was a gift from another party

  • The business is part of an LLC, partnership, or agreement where other parties have a contract to re-purchase your shares in case of a divorce.


Seek the Help of The Carson Law Firm Firm Attorneys

If you have any questions regarding business division in a divorce in Georgia, contact The Carson Law Firm today. Divorce laws governing asset division are complex, often delaying the process.

Our attorneys will guide and assist you through the entire legal process of your case. Contact us today to schedule a consultation with a child support attorney.

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