12 Facts You Should Know About How a Divorce May Affect Your Professional Photography Business
- Continue to operate the business following the divorce.
- One party buys the interest of the other.
- Close the business and divide any assets.
- Sell the business and divide the proceeds.
Professional photographers are just as vulnerable to the possibility of divorce as any other business owner or practicing professional. The more you know about how a divorce could affect your business, the more you can plan and prepare, so any disruption to your business can be kept to a minimum.
Business Assets Ownership
1. In general terms, any photography equipment, revenues or other assets of your business that you acquired prior to your marriage is considered separate property, or solely yours.
2. Conversely, any equipment or other assets acquired during the marriage is generally considered marital property. The value of any jointly owned property will be determined and be taken into account when the property division occurs. The list of marital property or assets is much longer than just your photography equipment or the value of your sales revenues. It includes retirement plans, annuities, life insurance and real estate and much more.
3. The more your spouse has been employed by your photography business or worked as an equal partner, the more of the martial property he or she is entitled, typically to a maximum of 50%. Even if your spouse has a totally different profession or job and has never worked with you in your photography business, property judged to be marital is jointly owned.
A Jointly Owned and Operated Photography Business
4. Another circumstance that affects a photography business differently is when a husband and wife own and operate it as equals. It wouldn’t be unusual for two professional photographers to be married and shooting separate or joint assignments under the same business entity.
5. In this example, the divorce settlement must detail the future disposition of the business, with only four available options.
6. If both parties are able to think clearly, then they should try to keep the business operating, especially if it’s generating acceptable revenues for both of them. It is only the most mature individuals, however, who will be able to operate the business together after they are divorced; therefore, one of the other three options is a more likely outcome.
7. If one spouse is willing to buy the other’s interest and that is agreeable to the spouse, then valuation will be calculated. In many cases, the spouse purchasing the business may not be able to pay in full immediately. It’s not unusual for the selling spouse to accept a note and payment plan.
Protecting Professional Photography Property/Assets
8. A prenuptial agreement is usually the best method to protect any professional photography equipment and other assets you bring to a marriage, or acquire during a marriage. Both parties agree in advance how property will be categorized as either separate or marital and its division at the time of a divorce.
9. A postnuptial agreement is another possible option, but some states don’t recognize it as legal and a postnup is much more likely to be contested than a prenup.
10. You can also structure your business in such a way that requires you to have a prenup in place before a marriage. If you have partners, then you can protect their share of the business by entering into an agreement that disallows either divorcing parties to transfer shares or interest in the business without the partners’ approval.
11. Another method is for your business to pay you a market-value salary, which becomes part of the family income like any other salary. If you don’t take a regular salary and re-invest that money into the business, your spouse could be entitled to a larger share of your business.
12. If you enter a marriage already operating a professional photography business, then, if possible, don’t invite your spouse to assist you or work with you, which could increase his or her claim of a share upon divorce.
The information in this PhotographyTalk article is for general purpose only. PhotographyTalk.com does not provide legal advice or imply legal strategies for photography business owners. They should seek such advice from qualified professionals.
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