Attorney
The answer to this question is every lawyer’s favorite answer: it depends. It depends on when you started the business, how it was funded, and how you’ve run it during the marriage. There are so many factors involved that it is not too far-fetched to say it depends on what your definition of “half” and “my” are.
As a former business owner who was inspired to go to law school after going through the divorce process himself, Attorney Bob Matteucci understands exactly how ridiculous this sounds. While it is frustrating that a simple yes or no answer is impossible, what that means is there is some room to negotiate here.
When “My” Business Is Really “Our” Business
New Mexico is a community property state, which means most assets owned by a married couple are generally considered community property. If you founded or acquired a business after you said “I do,” New Mexico law presumes it is equally owned. It doesn’t matter whose name is on the business license, who signed for the loan, or who did the day-to-day work of building it.
The presumption of co-ownership can be rebutted, but it requires clear and convincing evidence that no martial funds or effort were expended on the business. This is a difficult hurdle to clear, and that’s by design. Policy makers want spouses to be in equal partnership with one another so that neither party ever feels trapped in a marriage they no longer desire due to a lack of resources. Although this sort of financial equality is basically legal fiction, it does recognize the important role supportive spouses play. Having someone manage your homelife so you can focus on work contributes to your success.
Lien On Me: What Happens If You Started the Business Before Marriage?
Entrepreneurs who built something before walking down the aisle are not exempt from New Mexico’s community property laws. A business started before marriage is separate property. But keeping it strictly separate after marriage is harder than most business owners realize.
- A business owner who brings a spouse into operations, adds them to accounts, or uses a shared checking account to fund business expenses may have inadvertently turned what was once separate property into community property, or at least muddied the waters significantly. This is known as transmutation.
- If you used marital funds to grow the business, paid yourself a below-market salary and reinvested the rest, or relied on a spouse’s labor or support in ways that freed you up to build the company, New Mexico courts may find that the community acquired a financial claim against your separate property business. That claim is called a community lien.
This is one of the most important distinctions in New Mexico divorce law, and it’s worth understanding clearly: there is a legal difference between a business being a community asset and a separate property business being subject to a community lien. In the first scenario, the business itself is jointly owned. In the second, you own the business, but the community may be entitled to reimbursement or a share of the appreciation that marital effort or funds helped generate.
Half of the Business, But Not Literally
Even when a business is unambiguously community property, dividing it in “half” at divorce doesn’t mean your spouse walks away with half the company.
In most cases, the business is valued and the spouse who wants to retain ownership of it buys out the other’s interest, either with cash, retirement assets, real property, or some structured arrangement.
Thanks to his MBA degree and years spent running his family’s multi-generation retail shoe business, Attorney Bob Matteucci understands how important it is to keep the business intact and generating the cash flow needed to support the people that rely on its success. Forcing a sale or pushing for a division of assets that puts the business and the family that relies on it at risk is never Bob’s preference, even when those options would be easiest from a family law perspective.
Serving Families with Dignity & Compassion
If you or your spouse owns a business and you’re facing divorce in New Mexico, the question isn’t just “who gets what.” It’s how the business is characterized, how it’s valued, and how that value gets allocated across the marital estate in a way that’s fair and workable for you, your family, and the business. .
In these cases, having a family law attorney with genuine financial fluency matters. Bob Matteucci realized that when he was a business owner going through the divorce process. Now he is that attorney for other business owners in the Albuquerque area and New Mexico. Contact him today to set up a meeting and discuss your case.