Imagine this: you’re a young, recently married entrepreneur. Your company is worth $100,000. Your marriage is thriving and new – still in the honeymoon phase. You don’t make a prenuptial agreement because what could possible go wrong? Fast forward 20 years later. Your company is now worth $5 million, thanks to your hard work, but your marriage has fallen apart, and your spouse files for divorce, claiming half an interest in your $5 million business. Attorney Van Smith and his colleagues at Smith Strong, PLC can help you “divorce-proof” your company to avoid the pitfalls of either your spouse receiving half of the value of your company, or risking having to sell the company to obtain cash proceeds for the divorce.
Virginia Case in Which Corporation Did Not Pay
In a 2014 Virginia case involving equitable distribution of a corporation upon divorce, the court ruled that the wife would receive the corporation, but would have the pay husband half the value of the corporation, an amount of which he was entitled to. This amount would be from the corporation itself, as opposed to the wife’s personal funds. However, even after the court’s ruling, the corporation did not pay the husband any amount.
Therefore, husband went after the wife’s funds, as opposed to the corporation’s funds. He asked for a judgment against the wife in order to obtain his portion of the corporation’s value he was entitled to.
However, the Virginia Court of Appeals ruled that the trial court did not have discretion to grant a judgment against the wife personally, since the initial court order for the money was against the corporation.
Takeaway: Court Ordered Payments From Corporation Must Come From Corporation Itself
This means that if a court orders a jointly owned corporation to pay one of the parties in a divorce case, the money must come from the corporation itself, as judgments against your spouse individually to pay will not be granted. Call the attorneys at Smith Strong, PLC today to develop your comprehensive case plan to protect your business in a divorce.