Divorce is rarely simple, but for business owners, it’s a uniquely high-stakes affair. A business isn’t just an asset—it’s a livelihood, an identity, and often a legacy. When divorce proceedings begin, questions of valuation, ownership, and control become flashpoints that can either be negotiated with foresight—or litigated with devastating consequences.
At Lewis & Matthews, P.C., we represent business owners across Colorado who are facing divorce. We understand the legal intricacies involved and how to craft strategies that protect both the individual and the enterprise. If you’re a business owner heading into divorce, here’s what you need to know.
Key Issues in Business Owner Divorces
Business Valuation
You can’t divide what you can’t measure. Determining the accurate value of a business is often the most contested part of the process. Valuation methods vary—book value, market value, earnings multipliers—and the method chosen can have a massive financial impact. A neutral third-party valuation expert is often brought in to assess the company’s worth based on accepted accounting and legal standards. Learn more in the American Bar Association’s overview on valuing businesses in divorce.
Marital vs. Separate Property
Colorado is an equitable distribution state, meaning marital assets are divided fairly (though not always equally). Businesses started during the marriage are usually considered marital property, while businesses formed prior may be treated as separate—but even then, appreciation in value during the marriage may be subject to division. This is where precision in financial documentation and legal classification becomes vital.
Spousal Involvement
If the non-owner spouse worked in the business, supported its growth indirectly (e.g., raising children or handling household duties), or invested personal funds, they may have a strong claim to its value. A court will consider both tangible and intangible contributions.
Protecting the Business in Divorce
Prenuptial and Postnuptial Agreements
One of the most effective ways to shield a business from disruption is a well-crafted prenuptial or postnuptial agreement. These contracts can spell out in advance how the business will be treated in the event of divorce. If your marriage predates such an agreement, it may still be possible to create a postnuptial that can provide clarity.
Buy-Sell and Operating Agreements
These internal business documents can control what happens if an owner divorces. Some include clauses that limit ownership transfer to spouses or trigger mandatory buyouts. If your agreements are outdated—or nonexistent—it’s time to fix that. We cover the importance of these documents in our post on How to Handle Business Succession in Your Estate Plan.
Settlement Strategy
In many cases, the business owner will want to retain full control. Creative negotiation is often the key: trading other marital assets of equivalent value (e.g., retirement accounts, real estate) may allow for a clean, court-approved division without disrupting operations.
The Role of Forensic Experts and Attorneys
When valuations are disputed or financials are complex, a forensic accountant becomes an invaluable ally. They can trace commingled assets, assess cash flow, and identify financial misconduct. Equally important is having a family law attorney who speaks both legal and business languages.
At Lewis & Matthews, we work closely with financial experts and understand how to read cap tables, analyze corporate structures, and protect confidential business data during litigation.
Common Mistakes to Avoid
- Hiding assets or underreporting value: Courts don’t look kindly on deception—and it often backfires.
- Outdated or missing corporate documents: Buy-sell agreements, operating agreements, and bylaws must reflect the current business reality.
- Ignoring tax implications: Poorly structured asset divisions can lead to unnecessary capital gains or income tax burdens.
Why Business Owners Choose Lewis & Matthews
We’ve handled high-conflict, high-asset divorces for business owners across Colorado. Our team understands the nuances of both corporate law and family law—and how to protect your professional and personal future.
We also bring integrated knowledge from our Estate Planning Services, offering long-term strategies that protect your business interests beyond divorce.
And when your divorce involves dividing business assets, our insight into Dividing Property in a Colorado Divorce ensures nothing gets missed—or mishandled.
Business Owner Divorce Checklist
Divorces involving business interests demand a higher level of preparation and strategic insight. Use this checklist to ensure you’re approaching the process with clarity and control:
- Business Documentation: Ensure all foundational documents are current and accessible.
- Articles of incorporation, partnership agreements, and bylaws
- Buy-sell agreements and operating agreements
- Business tax returns (at least 3 years)
- Articles of incorporation, partnership agreements, and bylaws
- Valuation Preparedness: Gather the necessary financials for a proper valuation.
- Profit/loss statements, balance sheets, and cash flow records
- Business asset inventory and accounts receivable/payable
- Independent valuation (if already conducted)
- Profit/loss statements, balance sheets, and cash flow records
- Ownership Structure: Know what’s at stake.
- Breakdown of ownership percentages
- Any interest held in multiple businesses or subsidiaries
- Breakdown of ownership percentages
- Personal and Marital Financial Records: Separate fact from assumption.
- Marital and separate asset documentation
- Prenuptial/postnuptial agreements (if applicable)
- Spousal contributions (work, capital, support)
- Marital and separate asset documentation
- Professional Advisors: Have your team in place.
- Divorce attorney experienced in business valuation
- CPA or forensic accountant
- Financial planner (optional but helpful)
- Divorce attorney experienced in business valuation
- Settlement Scenarios: Start thinking proactively.
- Consider what other marital assets could offset your spouse’s share
- Be ready to negotiate control in exchange for equity
- Plan for tax consequences of any proposed division
- Consider what other marital assets could offset your spouse’s share
This checklist isn’t exhaustive—but it is essential. Walking into negotiations unprepared could cost you control of your business, or worse, dismantle it entirely.
Conclusion
If you’re a business owner, your divorce strategy must go beyond personal terms—it must defend what you’ve built. The sooner you involve counsel who understands both sides of that equation, the better your outcome will be.Let Lewis & Matthews, P.C. guide you through the complexities of divorce with a business at stake. Contact us today to schedule a consultation before negotiations begin.
