One of the biggest questions for any business owner in Colorado going through a divorce is this: “Will I lose my company?” If you are in this situation, this is a valid concern. The truth is that the answer is usually more nuanced.
Colorado is an “equitable distribution” state, which means the court divides marital property fairly based on your circumstances, not necessarily 50/50. Your business may be part of that division, depending on when and how you built, funded and operated it.
Why timing matters
Your business’s classification can affect its status in asset division. Here is the general rule behind separate and marital property:
- Acquired or founded before marriage: Your business begins as separate property
- Started during the marriage: Your business is typically marital property
However, there is one important thing to keep in mind. Even if you formed your business before marriage and it remained your separate property, its classification can change. Any increase in its value that occurred during the marriage is considered marital property subject to division.
How valuation determines worth
If the business (or a portion of it) is marital, the next step is valuation. Professionals will determine your business’s worth. In Colorado divorces, valuation often evaluates factors such as assets and income.
In most cases, you will not literally halve the business. Instead, you may keep the business and “buy out” your spouse’s marital share through other means (like retirement accounts or a structured payment plan).
Protecting your interests during divorce
Remember to keep clean books, avoid unusual transfers and document business decisions. Temporary orders can restrict major changes and accusations of hiding income or assets can backfire quickly. Evaluate your legal strategies before taking action with any potential marital assets.
Because business division is fact-specific, you may want to speak with a Colorado legal professional early. It is ideal to consult legal counsel when making financial moves.