What happens to a shareholder's stock in a divorce?
A shareholder’s stock in a small corporation is considered personal property. If a shareholder is going through a divorce, then the courts will generally consider the value of the stock as part of the division of property between the spouses based upon the state’s divorce laws.
If one of the parties to the divorce is actively involved in the operation of the small corporation, the courts will usually agree to the continued operation of the corporation by that party but will offset the value of the shareholder’s interest in the corporation with an equivalent value of other property to be given to the other spouse. The other property could be in the form of payments from the shareholder’s share of income from the
corporation, or it could be other property owned by the parties.
In most cases, it is to the advantage of all parties that the business continues to operate and generate income. Therefore, the preferred solution is some arrangement whereby the business goes on and one spouse is provided equivalent or similar compensation from other assets of the parties.
Author: Robert Montgomery
Attorney Robert Montgomery has been counseling and incorporating businesses for more than 20 years. During that time, he's helped set up more than a 1000 corporations and limited liability companies (LLC's). He's a business owner himself and has been corporate legal counsel for numerous small business corporations. He's presented lectures and seminars on the benefits and procedures involved with incorporating or forming LLC's and how to operate them for maximum benefit. View all posts by Robert Montgomery
