Introduction
If you’re getting a divorce, you and your spouse must decide how to divide up your debts and property as equally as possible, or request that the court do it for you. Arizona is a community property state, meaning that any debts or assets acquired during your marriage belong to each spouse (approximately) equally. While some couples can come to an agreement on how to do this on their own, others can’t and must seek a judge or arbitrator’s decision.
As a business owner, you might be concerned about what will happen to your company in the event of a divorce. If you started your business during your marriage (even if the other spouse wasn’t involved in the process), it is considered community property in the marriage and will belong to each of you in the event of a divorce. We’ll cover how splitting from your spouse will affect your business and what to do if you need legal assistance.
How does Divorce Impact Your Business in Arizona?
If you and your spouse are partners/owners in the business, a divorce can impact it in several ways. Depending on the interests of both parties, a divorce can result in either a change in ownership or a split of the business.
As you navigate the process, a divorce can impact a business in any of the following ways:
- Both sides may retain their ownership and continue representing their own interests as business partners with 50/50 ownership after a divorce.
- In some cases, one spouse may buy out the other, or one spouse will give up their shares for compensation in another form (such as another community asset, like the marital house or a greater split of other shared property).
- You may decide to dissolve your business, but the process will likely take longer and cost more than it would to keep it intact.
Getting the business handed over to one spouse and giving the other one compensation is one of the simplest ways to settle this matter. Still, it is not always a straightforward solution, depending on the interests and preferences of both parties. Some divorces settle amicably within a few months or less, while others are more complicated and expensive.
If the divorce is on less amicable terms or has complicating factors (like child custody), you should expect a lengthier and more expensive process. In some cases, hiring a family law attorney is of the utmost importance, especially when you can’t agree with your spouse.
What Factors Determine Division of a Business?
If both you and your spouse own part of the company, a 50/50 division may work best for you. Some factors the court will examine to make their decision include the interests of other partners in the business, asset ownership before marriage, and how much each spouse contributed to the business before marriage.
To divide a business in a divorce, the court will look at relevant financial information such as contracts, invoices, certificates, balance sheets, profit and loss statements, and more. Keep in mind that the division of assets may be more complicated for certain types of companies, such as a service-based business.
Dissolving Your Business in a Divorce
In some cases, a community property business won’t survive a divorce and breaking it up will work better. If you end up going with this option, the process will be complex since a fair share must be determined for both you and your spouse. This may require professional valuators and other experts to calculate your assets and value the business once it’s been dissolved.
A business’s value usually depends on one of the following:
- Assets – These are the sum of assets and liabilities surrounding the business
- Earnings value – This is a projection of potential future earnings for a business
- Market value – This is based on the prices of similar businesses that have recently sold
Remember that a business’s break-up value will be less than what your assets are worth due to financial complications, debt considerations, and other liabilities, so you might receive less than you expect on a sale.
If you end up breaking up the business, you must pay off affected parties within a specified order of priority. If the business has any debt, creditors will receive their payments first, followed by investors and, lastly, company partners. As a result, as company partners, the two parties in the divorce will only receive any remaining funds.
Due to the complexity of this process and the potential financial complications that can arise, at JacksonWhite Law, we often recommend an arrangement where one side agrees to leave the business to the other party. If you need support in navigating this process, our Family Law attorneys can help.
How Working With an Attorney Can Help
While you can get divorced yourself without an attorney, it may save you time and hassle to hire one and ensure you get a fair separation agreement. In some circumstances, legal counsel will be especially beneficial, such as a divorce with a large amount of marital property or a complicated business tied up into it.
If you have children with your spouse, involving a lawyer is even more important for reaching a favorable conclusion. Visitation and child custody matters can be emotional and complex, so having an objective third party is helpful for reaching a fair agreement.
An attorney will help provide additional guidance in the process and help you gather evidence and build a case to negotiate a fair outcome for you in the arrangement. Having an attorney who understands how to navigate legal proceedings can help you obtain a more favorable outcome than if you were to navigate the process alone.
Frequently Asked Questions on Divorce in Arizona
Divorce is a complex process that can be difficult for anyone to navigate on their own. Here are some commonly asked questions regarding divorcing in Arizona:
How do I start divorce proceedings?
To begin a divorce, one spouse must go through the clerk of the Superior Court to file a Petition for Dissolution of Marriage. You will pay the filing fee, and your spouse will receive a summons and a copy of the petition.
They must file their response within 20 days of being served these forms. If the service is in another state, they’ll have 30 days. The Dissolution of Marriage petition and your spouse’s response will begin the family court proceedings.
How long do I need to be an Arizona resident before filing for a divorce?
At the time you begin the proceedings, either you or your spouse must have resided or been domiciled for 90 days or more in Arizona. This also applies if one spouse is in the military and stationed in the state.
How long does it take to get a divorce?
The length of time a divorce will take depends on several factors, including whether it’s an uncontested or contested divorce. An uncontested (also known as “no-contest”) divorce can settle in a month or two. Contested cases, on the other hand, can take up to a year or more. If you can’t agree about the value of a business, or there’s a dispute over custody issues or finances, you may need evaluations from experts before the divorce can be finalized.
Who Gets To Keep the House in a Divorce in Arizona?
There is no set answer to who gets to keep a house in a divorce. Because Arizona law calls for both sides to receive an equal division of community property, the house must be distributed fairly so that both sides receive an equal distribution of the collective assets in the divorce.
However, a house cannot be split equally, so the judge must find another system to ensure a fair distribution of assets. In some cases, a judge may order that the house is to be sold and both sides can divide up the equity in the home. In other cases, a judge may award the house to one party, while giving the other party the right to other assets of an equal value.
How Much Does Divorce Cost?
The cost of a divorce in Arizona can vary widely depending on each case and the circumstances surrounding it. If a divorce is contested, litigation can make the process more expensive. However, if you are able to navigate the divorce through a process like mediation or alternative dispute resolution you can avoid higher costs associated with going to court.
Depending on your county, it normally costs anywhere from around $150 to $400 file for divorce with a Petition for Dissolution of Marriage. From there, the additional costs come from court and lawyer fees.
A divorce settled outside of court can typically cost anywhere from around $3,000 to $10,000 per spouse, while a divorce settled in court may cost as much as $10,000 to $20,000 per spouse.
What to Do if You Need Help with an Arizona Divorce
Navigating a divorce with a business involved can pose several challenges. Because businesses are considered community property under Arizona law, both parties must decide whether to share ownership, have one party buy out the other, or dissolve the business entirely and split the assets. If you’re unsure how to move forward, an attorney can be a valuable resource to provide support.
If your divorce case goes to mediation or court for any reason, you should speak with a family law attorney as soon as possible. Negotiating with your spouse and appearing in court can be difficult, and an attorney can help increase the chances that your best interests are supported. At JacksonWhite Law, our team of family lawyers is dedicated to helping you navigate the process.
Call the Family Law Team at (480) 418-7896 to discuss your case today.
