Jaburg Wilk


Protecting Your Business in a Divorce

Video Transcript:

How can I protect my business before I get married?

Hi, I’m Mitch Reichman. I’m a board-certified Family Law Specialist and I practice at Jaburg & Wilk.

What is community property?

Community property in Arizona creates a presumption that everything that’s acquired during the marriage by either spouse is owned by the community. It means it’s owned by them jointly. They each have an undivided 100% interest in all of the community property.

If I own a business, will that become communal property when I get married?

If you put money into a business and started the business before marriage, the character of your assets doesn’t change by virtue of your getting married. So if you come into the marriage with a business that’s a going concern, that business is your separate property. The difficulty is if you are working in the business and the business increases in value during the marriage how to apportion the increase in value between what the business was in terms of its value and earning potential at the time of the marriage, at which time it was your separate property, and how it’s changed during the course of the marriage. Those are very difficult questions to answer and require typically experts to do that kind of evaluation.

How can I protect my business before I get married?

There is a relatively easy way to protect your business or any other separate property before you get married and that is to have a pre-marital agreement. Pre-marital agreements are presumptively enforceable in the state of Arizona. We have adopted something called a Uniform Pre-marital Agreement Act and under the Act, as long as you follow certain guidelines, there is a very strong probability that the court will enforce that agreement.

What business advice do you have for someone going through a divorce?

They need to be prepared for a forensic evaluation of their business. Someone is going to be looking at all of the personal benefits they get from the business and attempting to quantify them. They are going to be looking for any unusual transactions, they are going to be looking for any unusual activity in the business that suggests that somebody might be divorce planning and so what you want to do is you want to operate as you always have to the extent that you can and if there is some event or occurrence that causes you to need to do something special, you want to document it as best you can.

About the author:  Mitchell Reichman is an Arizona State Bar Board Certified Family Law Specialist and attorney at the Phoenix law firm of Jaburg Wilk.  He is a Board Member of the Executive Council of the Family Law Section of the State Bar and rated AV Preeminent by Martindale Hubbell. Mitch has been named a "Best Lawyer in America" by Best Lawyers, "Arizona Top 10 Family Law Lawyer" by Arizona Business Magazine and a "Southwest Super Lawyer." Now in his thirty-first year of practice, Mitch seeks to maximize the probability of each of his clients obtaining a favorable outcome in his or her family law conflict.