Divorce and the division of Louisiana family businesses

Louisiana laws concerning marital property are unlike most other states. Most states divvy up divorce assets and debts according to equitable distribution rather than community property laws. Here, unless spouses have made earlier prior financial agreements, property settlements split ownership right down the middle.

Businesses may qualify as either separate property, belonging to one spouse, or marital property, shared by both. A business purchased before marriage is the owner’s property after divorce, but there are exceptions. Problems occur when separate property is commingled with marital property.

Let’s say you marry a few years after opening a Baton Rouge pizza shop. To make the most of the investment, your spouse agrees to help out with the business. At first, the spouse works part-time, jumping in during busy periods, but gradually assumes a sizeable role in the company.

A judge might determine the pizza shop is no longer separate property, due to the non-owner spouse’s deep involvement in the business. Failing to keep business and personal assets apart also causes courts to question the separateness of companies. Family businesses that qualify as marital property must be divided between spouses, although an outright sale isn’t always required.

Some former spouses tough it out and continue to co-own and operate family businesses after divorce. For many exes, this isn’t a desirable solution. Another way to solve the problem is for one spouse to buy out the other’s interests in the company or surrender other marital assets as a trade-off.

CBS News reported some advisers feel the best way to cope with these divorce scenarios is to prevent them from happening. Prenuptial and post-nuptial agreements can be used to establish ownership of marital assets and debts. Louisiana courts honor these agreements, provided the contracts are signed voluntarily and assets are fairly valued and portioned.

Divorce attorneys address concerns about the protection of separate property, commingled assets and property laws.

Source: CBS News, “Who holds onto the family business when couples divorce?” S.Z. Berg ,MainStreet.com, Feb. 10, 2015