A principal issue in contested divorces concerns the division of the parties’ assets. Before a court can equitably divide property, however, it first must classify the property either as marital or non-marital.(1) The classification process unsurprisingly engenders disputes, one of which frequently involves classification of a spouse’s ownership interest in a business. This article explores the legal standards governing classification of business interests on divorce.

Marital assets subject to equitable division on divorce consist of all real and personal property acquired as a direct result of the labor and investments of the parties during their marriage.(2) In contrast, a spouse’s property acquired/created before marriage, and property acquired during the marriage through gift or inheritance, remain the separate property of that spouse, unless converted in whole or in part to the property of the marital unit or the other spouse.(3)

The above rules equally apply to a spouse’s ownership interests in a business. On the one hand, a spouse’s business interest acquired prior to marriage remains non-marital property of that spouse.(4) The same holds true of a business interest obtained during the marriage using a spouse’s separate funds (i.e., the spouse’s premarital funds or funds acquired during the marriage by gift or inheritance).(5) On the other hand, a business interest acquired during the marriage using funds generated from the labor or investments of either spouse during the marriage constitutes marital property subject to equitable division.(6)

While a business interest itself may remain a spouse’s separate property on divorce, the appreciation in value of that interest during the marriage may constitute marital property subject to equitable division.(7) “[I]f the separate non-marital property of one spouse appreciates in value during the marriage solely as the result of market forces, that appreciation does not become a marital asset which is subject to equitable division; but, if the separate non-marital property of one spouse appreciates in value during the marriage as the result of efforts made by either or both spouses, that appreciation does become a marital asset which is subject to equitable division.”(8)

(1) Bass v. Bass, 264 Ga. 506, 448 S.E.2d 366 (1994). (2) Wright v. Wright, 277 Ga. 133, 134, 587 S.E.2d 600 (2003); Payson v. Payson, 274 Ga. 231, 231-232(1), 552 S.E.2d 839 (2001). (3) Coe v. Coe, 285 Ga. 863, 684 S.E.2d 598, 600(1) (2009); Payson, supra, 274 Ga. at 231-232(1); Thomas v. Thomas, 259 Ga. 73, 74-75, 377 S.E.2d 666 (1989); and Halpern v. Halpern, 256 Ga. 639, 352 S.E.2d 753, 754 (1987). (4) See Halpern, supra. See also Sullivan v. Sullivan, 295 Ga. 24, 757 S.E.2d 129, 132(1) (2014). (5) Wright, supra, 277 Ga. at 134(1). (6) See, e.g., Miller v. Miller, 288 Ga. 274, 705 S.E.2d 839 (2010). (7) Sullivan, supra, 757 S.E.2d at 132(1); Jones–Shaw v. Shaw, 291 Ga. 252, 253, 728 S.E.2d 646 (2012); and Bass, supra, 264 Ga. at 507. (8) Bass, supra, 264 Ga. at 507. See also Wright, supra, 277 Ga. at 134.