The answer depends on how the business is organized legally and on the spouses’ willingness to agree, as well as how many people participate in the venture.
Under Article 34 of the Family Code of the Russian Federation, property acquired by spouses during marriage is treated as joint property. This includes income earned from each spouse’s entrepreneurial activities. Real estate, securities, deposits, stocks, and other assets obtained with joint funds are considered joint property, regardless of whether the second spouse participates in the company or holds any management role. In all cases, these assets are shared equally between the spouses.
There are notable exceptions to this rule.
It is not possible to treat a business as personal property under Article 36 of the RF Civil Code. For instance, a business inherited or donated to one spouse, a business purchased with that spouse’s personal funds before marriage, or assets acquired with income from the sale of real estate may be excluded from joint ownership.
Spouses can set specific terms for dividing labor through a formal agreement.
A marriage contract can spell out a separate property regime and include provisions that protect a spouse’s ownership stake in an LLC acquired during marriage. Article 41 of the Family Code allows the marriage contract to be made at any time, before or during marriage.
Additional rules can be reflected in the agreement governing joint property distribution between spouses.
Another approach to safeguarding a business is to insert protective language in the company charter. For example, paragraph 10 of Article 21 of the Federal Law on Limited Liability Companies provides a requirement for LLC participants to consent before transferring a share to a third party.
Common division options include several practical paths.
The first option keeps the business with one spouse while the other receives compensation. This route suits situations where one partner does not intend to actively participate.
The second option is business restructuring. This approach is chosen when both spouses plan to stay involved. Typically, a divorce triggers a reorganization that splits the original company into two entities, or less commonly, a division of the company while it continues to operate. In the first scenario, the original company ceases to exist and its rights and obligations are transferred to the new entities. In the second, rights and obligations are allocated to the newly formed company while the original ceases to operate as before.
The third option involves selling the business and sharing the proceeds. In this case, assets are sold to related parties and the resulting proceeds are divided between the spouses.
From a practical standpoint, splitting an LLC is often the least painful route. If other participants refuse agreement, the former spouse may not gain membership but can receive monetary compensation instead.
If there are no outstanding claims between spouses in a joint stock company, the securities portfolio can be divided equally. In practice, an agreement may leave the portfolio with one spouse, while the other receives monetary compensation.
When it comes to individual entrepreneurship, the situation is more complex. An individual business cannot be split in kind; only the income generated during the marriage can be divided.
It is advisable for spouses to establish a clear regime for division of labor in a marriage contract or a property division agreement. This approach considers each party’s interests and sets out outcomes on transparent terms. Otherwise, seeking legal counsel is prudent.
The text presents a personal viewpoint and may not reflect editors’ positions.