If you or your spouse owns a business in New Mexico, it’s important to understand how that business ownership will be handled in the event of a divorce. For many, a business represents years of hard work and financial investment, so the thought of losing it can be overwhelming. The reality is, not all businesses are considered marital property, but determining what is and isn’t subject to property division isn’t always straightforward.
Marital vs. Separate Property in New Mexico
In New Mexico, property acquired during the marriage is generally considered marital property. That includes income, real estate, and even business ownership. However, some property may be classified as separate property, which means it won’t be divided in a divorce.
Key Differences:
- Marital Property: Acquired during the marriage, regardless of whose name is on the title.
- Separate Property: Owned before the marriage, inherited, or received as a gift either before or after the marriage.
If a business was started before the marriage, it may be considered separate property. However, if the business grew in value during the marriage or if marital funds were used to fund the business, it could be subject to property division during the divorce, either in whole or in part.
When Is Business Ownership Considered Marital Property?
Even if a business was started before the marriage, that doesn’t automatically protect it. Courts will look at several factors to decide whether business ownership is marital or separate property:
- Date of Acquisition: If the business was formed during the marriage, it will likely be established as marital property.
- Commingling of Funds: If joint finances were used to support the business, which would convert it into marital property, either in whole or in part depending on how much commingling occurred.
- Spousal Contributions: If your spouse helped run the business, supported you financially, or contributed to its success, the court may count that as a reason to include either part of or the whole business in property division.
- Increase in Value: If the business grew in value during the marriage, that increase may be considered marital property, even if the original business ownership began as separate property.
How Will Business Ownership be Divided in a Divorce?
New Mexico follows community property laws, meaning marital property is typically divided equally between spouses. When it comes to property division involving business ownership, things aren’t always so clear-cut. Rather than dividing the business itself, courts often aim for an “equitable” solution which could involve awarding the business to one spouse while compensating the other with assets of similar value.
Common Outcomes:
- One spouse buys out the other’s interest in the business.
- The business is sold and the proceeds divided.
- Spouses continue to co-own the business (though this is rare and often not recommended).
What If You Co-Own a Business with Your Spouse?
When both spouses are involved in running the business, property division can become slightly more complicated. The court will consider each person’s role, contributions, and whether the business can continue without disrupting its operations.
Options may include:
- One spouse selling their share to the other
- Selling the business entirely and splitting the proceeds
- Structuring a payout over time
In these situations, emotions and finances often go hand in hand. Having clear, experienced legal guidance can help protect both your business ownership and your peace of mind.
Protecting Your Business During Divorce in New Mexico
If you’re concerned about protecting your business ownership, there are proactive steps you can take, ideally before a divorce becomes an issue:
- Prenuptial or Postnuptial Agreements: These can specify how property will be handled in a divorce, including what happens to a business.
- Operating Agreements: Business documents can limit a spouse’s ability to claim ownership or outline buyout terms.
- Keeping Finances Separate: Avoid using marital funds to support the business or paying yourself less than market rate, as these can blur the line between separate and marital property.
Protect Your Business with an Experienced New Mexico Divorce Attorney
If you’re going through a divorce and have business ownership at stake, you need a legal team that understands the unique challenges of property division involving businesses. At New Mexico Legal Group, our experienced divorce attorneys work with business owners across the state to protect their hard work.
Whether you’re just starting the process or preparing for negotiations, we can help you assess your business’s status, determine its value, and advocate for a fair outcome. Schedule your consultation today and take the first step toward protecting your business ownership and your future.