How to divide the property of an individual entrepreneur?

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Divorce is a process that is inextricably linked with the division of jointly acquired property, including individual entrepreneurship. Quite often in practice there are married couples who engage in business, thereby providing for their family. According to the rules reflected in Art. 34 of the RF IC, in the event of dissolution of the marriage union, everything that was acquired by citizens together must be divided. Business distribution is accompanied by a number of subtleties and features that must be observed. The specificity of the division of entrepreneurship is that in most cases the parties cannot agree peacefully and they have to resort to mechanisms for forced distribution of shares. You can find out all the details of dividing an individual entrepreneur during a divorce in the article.

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Is the property of an individual entrepreneur divided during a divorce?

During the marriage relationship, the husband and wife acquire some property, create a business, and acquire securities.
Everything that was acquired during the marriage is joint property, which is reflected in Part 1 of Art. 34 RF IC. The income of each spouse from entrepreneurial activity is common, as specified in Part 2 of Art. 34 RF IC. Thus, property acquired for the implementation of a business is joint and must be divided between husband and wife in the event of a divorce according to general rules. At the same time, property means not only movable and immovable objects, but also deposits, shares, securities, products and income from individual entrepreneurs. Attention

If a marriage contract is concluded between spouses, the property regime changes. Thus, the principles of dividing joint real estate are changing. For example, the property or business of an individual entrepreneur can be transferred to only one spouse.

Is it possible to conclude a marriage contract?

The parties have the right to take care in advance of a fair division of the IP. Before marriage or during family relations, a marriage contract must be signed. It undergoes mandatory notarization.

A husband and wife have the right to separate income from business activities from general family cash receipts and establish a separate ownership regime for them.

Property used in business can also be left in the ownership of the spouse, who is registered as an individual entrepreneur. In this case, the second party is entitled to equal compensation for its share. If an unfair division is made, the husband or wife has the right to challenge it in court.

Normative base

The property regime of spouses and the procedure for dividing individual entrepreneurs upon divorce are clearly regulated by the norms of the current legislation. In order to understand the entire array of laws, you can refer to the table below.

Is the business of an individual entrepreneur divided during a divorce?

Individual entrepreneurship is one of the forms of business that is conducted by an individual citizen without forming a legal entity. In most cases, property and valuables with which a person conducts his business are recognized as personal objects and belong to the owner by right of ownership. Moreover, despite the fact that an entrepreneurial business is registered in the name of an individual (husband or wife), in the event of a divorce, the individual entrepreneur is divided between the spouses according to general rules.

Clause 3 art. 34 of the RF IC regulates that even if during the marriage one of the spouses managed the household, cared for children, or for other reasons did not have their own income, the property is recognized as common. Most often this rule is used in relation to women.

IMPORTANT

During the divorce period, it is not so much the individual entrepreneur’s business itself that is divided, but rather the property used in the process of entrepreneurial activity or received as a result of work. Even if the business of an individual entrepreneur was registered before the wedding, and real estate was acquired during the marriage, the property for the spouses is recognized as common.

The rule for dividing individual entrepreneurs during a divorce

To understand the general business section, you need to understand what is meant by the concept of individual entrepreneurship. This is a business owned by an ordinary individual. There is no need to become a legal entity to register. Most often, the owner of the property is the person for whom the individual entrepreneur is registered. If you need to get a divorce, it becomes unclear how to divide the individual entrepreneurs of the spouses during the dissolution of the marriage. The fact is that the division of such property may entail a disruption in the well-functioning scheme of entrepreneurial work.

You need to know that even though the business is registered for only one person, the individual entrepreneur can be divided during a divorce. The fact is that according to the legislation of our country, everything can be divided during a divorce, including the property of an individual entrepreneur. The court will not be interested in whether the second person took part in the business or was engaged in housekeeping, raising children, etc. The IP must be divided into two equal parts. This principle must be observed.

Note! If previously the spouses took care to draw up a written agreement, which described a different procedure for dividing individual entrepreneurs , then all the principles described above do not apply. The division will take place according to an agreement certified by a notary.

When it comes to dividing a business, we mean property.
If one of the spouses registered an individual entrepreneur before the wedding, and the property necessary for the business was purchased later, according to the general scheme. The following property of an individual entrepreneur is usually considered jointly acquired property :

• securities;
• office rooms, buildings and other real estate;
• goods purchased for resale;
• transport necessary for the functioning of the company;
• raw materials from which they planned to make products;
• the finished product itself,
• equipment;
• loans, non-cash and cash, deposits;
• property obligations and rights (leasing, rent, etc.).

Be careful! You need to understand that during a divorce, not only income from the activities of an individual entrepreneur will be divided, but also debts . They are also divided in equal shares.

What property of an individual entrepreneur is subject to division?

Part 2 art. 34 of the RF IC establishes a list of types of property of an individual entrepreneur, which is divided during the divorce process. These real estate properties include the following categories:

1. Movable objects are various types of transport.
2. Real estate – land plots, construction projects, apartments, offices, houses, equipment or other.
3. Funds received during the activities of an individual entrepreneur can be stored in cash, or can be in accounts with a credit institution.
4. Securities.
5. Shares are a type of securities with the help of which a person’s right to part of the fund’s property is secured.
6. Currency assets are funds stored in the form of foreign currency.
7. Products and income from the work of individual entrepreneurs.
8. The raw materials from which the final product is produced.

Attention
Part 3 Art. 39 of the RF IC reflects that not only the income and property of the spouses, but also all debt obligations of the husband and wife are recognized as common. If, during the course of the individual entrepreneur’s activities, loans or other types of loans were issued, they are also subject to division during the divorce process.

What is subject to division

Any property of an individual entrepreneur acquired and/or received during marriage is subject to division. It is considered joint property and is divided equally upon divorce. The list includes:

• Real estate.
• Transport.
• Equipment.
• Gooods at the work.
• Cash.

The debts of the individual entrepreneur are also divided equally on the same basis. Before you begin dividing, you should clarify how profitable this procedure will be. Perhaps the financial condition of the individual entrepreneur is such that it is easier to give up the property.

IP property not subject to division

The property of a spouse registered as an individual entrepreneur is subject to division during a divorce, regardless of whether these real estate objects are used in the process of entrepreneurial activity or not.

At the same time, the legislator identifies several categories of individual entrepreneurs’ property that are not subject to division during a divorce in accordance with Art. 36 RF IC:

1. Real estate acquired before the registration of marriage. For example, an individual entrepreneur was registered before the wedding, as well as all the property necessary for work.
2. Items given as a gift during marriage, or received by inheritance or other gratuitous transactions.
3. Results of intellectual work - if in the course of the activities of an individual entrepreneur a unique product of intellectual activity is created, ownership remains with the author.

Forms of division of property of an individual entrepreneur

The legislator does not establish a strict list of forms of distribution of property of an individual entrepreneur upon divorce. In practice, the following options arise for the division of marital property:

1. Buying out a share of property from the second spouse - this method is the most reasonable and common. Under this option, a purchase and sale transaction takes place between a husband and wife who were previously married. For example, during a divorce, all property is divided into two shares in the amount of 50%. The husband, registered as an individual entrepreneur, buys part of the real estate from his wife. As a result of the transaction, the wife receives the funds, and the man remains with all the property.
2. Providing other property of equal value in exchange for a share . During the implementation of entrepreneurship, equipment is involved, which is divided between spouses during the divorce process. To ensure that the production process is not interrupted and equipment is not sold, the entrepreneur spouse can give away part of his personal property in exchange for equipment for the business. An important condition in this situation is equivalence in cost. For example, if the estimated price of property for an individual entrepreneur is 50,000 rubles, then in exchange for this equipment objects must be transferred, the market value of which will also be 50,000 rubles.
3. Sale of business to individual entrepreneurs. It is used quite rarely; it is more relevant for shares in the authorized capital of an organization. The essence of this option is that during a divorce, the spouses find a buyer and sell the entire business to a third person. The funds received during the transaction are divided between the husband and wife as other property. For individual entrepreneurs, this option is not very convenient, because finding a buyer is quite difficult and it is a lengthy process.

Section options

If only one spouse is engaged in business, then the division of individual entrepreneurs may not be beneficial for him. It can lead to disruption of the production chain, loss of customers, and losses.

Depending on the situation, the following methods of distribution of commercial property are possible:

• buying out your share from the second spouse;
• provision of other equivalent property in exchange for a share;
• sale of individual entrepreneurs and division of proceeds equally.

If a citizen intends to continue to be an entrepreneur, then the individual entrepreneur should be retained. The first and second options are suitable for this.

To develop the optimal solution for the division of joint property, it is recommended to seek the advice of a lawyer.

Valuation of property of an individual entrepreneur during a divorce

The procedure for assessing property is the most important procedure that should be carried out at the stage of preparation for the division of property of an individual entrepreneur during a divorce. It is the expert’s opinion that will reflect the objective value of the property that will be divided during the divorce. According to the rules reflected in Art. 8 of the Federal Law “On Valuation Activities in the Russian Federation”, an appraisal must be carried out if there is a dispute between spouses regarding the price of the individual entrepreneur’s property.

IMPORTANT

Within the meaning of Art. 4 of the Federal Law “On Valuation Activities in the Russian Federation”, valuation work during the division of property and business of an individual entrepreneur upon divorce of spouses is organized only by those persons or enterprises that have received the appropriate qualifications and insurance.

To conduct a property assessment for dividing the property of an individual entrepreneur during a divorce, you must do the following:

1. Select the appropriate organization that has the right to evaluate the property.
2. Collect the necessary documents: certificate of registration of individual entrepreneurs, reports on the results of economic activities, balance sheet, analysis of provisions on assets and liabilities of the balance sheet, details of accounts payable and receivable, information about tangible and intangible objects of individual entrepreneurs, lease agreements, purchase and sale agreements, etc.
3. Send all collected documents and information to a specialist appraiser.
4. At the appointed time, pick up the completed report with the assessment results.

How is the property of an individual entrepreneur divided during a divorce?

Art. 38 of the RF IC records several options for dividing common property, including individual entrepreneurs in case of divorce:

1. Voluntary method - spouses in the process of divorce draw up an agreement, which must be certified by a notary, which is strictly regulated by Part 2 of Art. 38 RF IC. The method under consideration is relevant if the husband and wife were able to agree peacefully and there are no disputes. Within the framework of the agreement, not only the property of an individual enterprise can be divided during a divorce, but also any other common items or objects. When signing an agreement, the legislator allows the spouses to choose the most convenient option for them for dividing the property of an individual entrepreneur during a divorce.
2. Judicial option – within the meaning of Part 3 of Art. 38 of the RF IC, if the spouses have not reached a mutual decision, any citizen can go to court. During the trial, the judge considers the circumstances of the case, analyzes the list of property, and regulates the division option. The procedure for legal proceedings is regulated by the norms of the Code of Civil Procedure of the Russian Federation.
3. Marriage contract - in accordance with Art. 42 of the RF IC, citizens have the right to enter into an appropriate contract at any time after registering a marriage. The document reflects the property rights of each citizen, discusses the procedure for dividing the business, etc.

Depending on the current situation, spouses can choose the most convenient option for dividing the property of an individual entrepreneur during a divorce. Concluding a marriage contract or agreement is the simplest and fastest option. However, if there are insurmountable disputes, you should go to court.

IP section by agreement

The voluntary method of dividing property is the most convenient if the parties do not have serious property contradictions. If the individual entrepreneur owns property acquired during the marriage, the spouses can divide it by concluding a division agreement. Under the terms of this document, the parties have the right to establish any ownership regime.

For example, do not divide the business equally, but recognize it as the completely personal property of the entrepreneur himself. Or indicate that the spouse who is an individual entrepreneur receives all the property used in business activities, and the second spouse receives a joint apartment in return.

It is important to adhere to two principles when drawing up a separation agreement:

1. Its terms and conditions must not conflict with current Russian legislation.
2. The terms of the agreement must not violate the property rights of persons other than spouses. For example, if an individual entrepreneur is obliged to give up part of the property in payment of a debt to creditors, it cannot be divided between spouses.

There is no separate form for such a document. Therefore, an agreement is drawn up in accordance with generally accepted standards using office work rules. The text must contain the following information:

1. Passport details of the parties.
2. Place and time of conclusion of the agreement.
3. A list of property that the spouses intend to divide. It is necessary to provide a link to the title documents and describe the technical characteristics of the objects to be divided.
4. The procedure for distributing shares in common property.
5. Special additional conditions. This point can be omitted.
6. Signatures of participants with transcript.

If the spouses do not have legal practice, it is advisable to entrust the drafting of the document to a professional lawyer in order to avoid future litigation.

On our website, if you wish, you can find the text of the agreement on the division of property of an individual entrepreneur.

Procedure

If spouses intend to divide the property of an individual entrepreneur through an agreement, they need to:

1. Determine the list of property objects, collect title and technical documentation for them.
2. Contact a lawyer or notary to draft the text.
3. Sign the separation agreement.
4. Send it to a notary for certification. This step is required. Without it, the document has no legal force.
5. Contact the registration authority if the terms of the document have changed the shares in ownership rights to objects subject to mandatory state registration. For example, if we are talking about vehicles, you should contact the traffic police, etc.

The Agreement comes into force immediately after its confirmation, unless otherwise specified by its terms.

Required documents

Documentation

When contacting a lawyer or notary to draw up a document and certify it, you will need to submit a number of documents. The list will differ slightly depending on the type of property being divided. But in general it includes:

1. Identity cards of the participating parties.
2. Documents confirming ownership rights to divisible property.
3. Marriage (divorce) certificate.
4. Documents for minor children (if the couple has them).
5. Technical documentation for divisible property.

You may also need additional loan agreements, etc.

Required documents

The package of documents required for dividing the property of an individual entrepreneur during a divorce differs depending on the chosen method.

If the spouses decide to contact a notary, they should collect the following official papers:

1. Certificate of registration of individual entrepreneur.
2. Passports of both spouses.
3. Marriage registration certificate.
4. Birth certificate of children - if available.
5. A purchase and sale agreement or other documents confirming ownership of the individual entrepreneur’s property subject to division.

The specified list of documents is indicative; the specialist may request additional documents.

In a situation where the spouses decide to go to court to divide the property of an individual entrepreneur during a divorce, it is necessary to collect the following official papers:

1. Statement of claim for division of property of an individual entrepreneur, written according to the rules of Art. 131 Code of Civil Procedure of the Russian Federation.
2. The passport of the person applying to the court, if there is a passport of the defendant, must also be attached.
3. Certificate of registration of marriage or divorce.
4. Birth certificate of children.
5. Documents confirming registration in the form of individual entrepreneur.
6. Purchase and sale agreements or other evidence, documents confirming ownership of property. If we are talking about transport, you must attach a passport and documents for the car, or certificates for equipment.
7. Appraiser's report with the value of all property.
8. Accounting statements confirming the level of income received as a result of entrepreneurship.
9. Receipt for payment of state duty.

An indicative list of appendices to a claim for the division of business and property of spouses upon severance of official relations is regulated by Art. 132 Code of Civil Procedure of the Russian Federation.

Kiosk for two

Such disputes are among the most common in our courts. But the fact is that the division of once common property is complicated not only from the material and moral side. Problems also arise in purely legal aspects, when it comes, for example, to the division of a business. An experienced lawyer will agree - it is easier to divide a business if we are talking about an LLC. Then you can receive a share in the company or compensation for its real market value. But it’s much more difficult when it comes to individual entrepreneurship. How to “saw up”, for example, a metal repair shop or a kiosk selling consumer goods, between former spouses?

In our case, the situation was this: the spouse was listed as an individual entrepreneur, but the money for the small business, of course, came from the family. Local courts, having considered such a dispute, said that the husband should be awarded compensation for his wife’s business. But the Supreme Court did not agree with this decision and explained how this dispute should have been resolved correctly.

Such clarifications from a high court may be of interest to many citizens.

After all, according to the Federal Tax Service, as of the spring of this year, 3 million 899 thousand individual entrepreneurs were registered in Russia.

Legal aspects of family relations are discussed by RG experts in the “Legal Consultation” section

Our story began from the moment when the spouses, after a divorce, began dividing their jointly acquired property. They lived together for three decades, so there was something to share. The division included an apartment, a house, a plot of land, a garage, shares, non-residential premises and the wife's small pharmacy business, which she operated under a license. Simply put, a pharmacy kiosk. The ex-husband wanted to receive half the market value of this individual enterprise, namely 2.6 million rubles.

If an individual enterprise existed before marriage, then this is not a joint property

Local courts agreed with his demand, included the business in the general list of divisible property and recognized the ex-spouse’s right to compensation in the amount of these same 2.6 million rubles. According to local courts, the spouses organized a pharmacy trade while they were still married and invested common funds in it.

But the wife did not agree with such decisions and tried to challenge them. It reached the Supreme Court. There they studied the materials of the dispute and agreed with the citizen’s arguments.

This is the main thing that the Supreme Court said. In domestic civil law there is no such object as business. This is not really a property, but an activity. In our Civil Code, the objects include things, including money and securities, there are property rights, and so on. Everything is listed in Article 128 of the Civil Code.

The Family Code speaks about the common joint property of spouses. According to its article 34, it turns out that the category of jointly acquired property includes everything that an individual entrepreneur acquired during marriage, as well as income from business activities. This means that it is this property and income that is subject to division in a dispute between spouses.

When the question arises about dividing the share or property of an individual enterprise, you need to look at when its activities began and on what date the documents were issued. You also need to determine the value of the property: inventory, commercial equipment, cash balance, loans and debts, if any. In our case, the local courts did nothing of the kind.

And if the individual enterprise existed before the marriage, then this is not a joint property at all. And how will the husband prove that the money invested in his ex-wife’s pharmacy business was shared?

Thus, the Supreme Court overturned the decisions of the lower authorities in the part where they recognized the “individual entrepreneur” business as the object of division and awarded 2.6 million rubles in compensation to the ex-husband. The case was sent for review.

Division of property and business of an individual entrepreneur in case of divorce by agreement

In order to draw up an agreement on the division of property and business of an individual entrepreneur during a divorce, and have the document certified by a notary, the spouses need to do the following:

1. Verbally agree on the procedure for implementing the division of property and business of an individual entrepreneur during a divorce. Spouses determine the size of shares for each (husband and wife). Individuals can choose to divide the property of an individual entrepreneur in the part of 50% to 50% or any other option to choose from.
2. Consider options for dividing the property of an individual entrepreneur during a divorce and choose the one that will be the most convenient and optimal. It is necessary to describe not only the method, but also the duration of the process.
3. Draw up a draft agreement on the division of property and business of an individual entrepreneur in writing. At the same time, it is necessary to prepare not only a printed, but also an electronic version. The agreement details the sequence and timing of the division of property of an individual entrepreneur upon divorce.
4. Collect all necessary documents.
5. Contact any notary and show up at the appointed time for your appointment. Within a few minutes, the specialist will certify the agreement on the division of the business and property of the individual entrepreneur upon divorce and enter the information into the register. From the moment of signing, the document becomes legally binding.

In order for spouses to independently draw up a document, you can see a sample agreement on the division of property during a divorce and

Section order

The division of individual entrepreneurs during a divorce can be made on the basis of a mutual agreement between husband and wife or through the court.

By agreement of the parties

If the parties have reached a compromise regarding the distribution of shares, they sign a division agreement.

To ensure a fair distribution of property, you need to do the following:

• discuss among themselves who gets what and in what volume;
• conduct a property assessment;
• draw up an agreement;
• follow the agreement.

The agreement should be certified by a notary, although the law does not require this to be done. This measure will avoid unnecessary disagreements.

If you encounter difficulties in drafting an agreement, it is recommended that you seek the help of a qualified family law lawyer.

Through the court

The judicial procedure for the distribution of property is relevant when it is impossible to reach an agreement. It may take 2-3 months.

One spouse must do the following:

• make a list of property that will be divided;
• conduct an independent cost assessment;
• file a claim;
• submit documents to court;
• take part in legal proceedings;
• obtain a court decision and writ of execution;
• If the defendant refuses to comply, contact the bailiff service.

If the husband or wife does not agree with the decision, they have the right to appeal it. This must be done before it comes into force.

Division of property and business of an individual entrepreneur through the court

In order to formalize the division of property of an individual entrepreneur during a divorce in court, spouses need to do the following:

1. Determine jurisdiction, that is, understand to which authority an application for division of the business and property of an individual entrepreneur should be sent in the event of a divorce. If the total value of joint property is more than fifty thousand rubles, it is necessary to send the claim to the district court, if 50,000 rubles or less, to the magistrate.
2. Draw up a statement of claim according to the rules of Art. 131 of the Code of Civil Procedure of the Russian Federation, reflecting information about the plaintiff, defendant, requirements and circumstances of the case. At the end of the petition for the division of property of an individual entrepreneur during a divorce, a list of attachments is indicated, signed and dated.
3. Collect a list of applications provided for in Art. 132 Code of Civil Procedure of the Russian Federation.
4. Send all documents to the court office in person or electronically through the State Automated System “Justice” portal.
5. Receive a determination to accept the claim for proceedings. The document indicates the date and place of the hearing.
6. Appear in the courtroom, state the demands specified in the claim, provide evidence and witnesses. At the end of the hearing, a final decision is made orally.
7. After 30 days, the decision taken comes into force. Within a month, one of the spouses can send an appeal to a higher court in accordance with Art. 321 Code of Civil Procedure of the Russian Federation.

An approximate example of a claim for division of property (business) during divorce is available.

Timing and cost

The amount of the state fee depends on the method of dividing the property of an individual entrepreneur during a divorce. So, if the spouses decided to sign the agreement voluntarily, it is necessary to pay a fee in the amount established by clause 4, part 1, art. 22.1 Federal Law “Fundamentals of legislation on notaries”. The tariff limits depend on the price of the subject of the agreement:

1. If the amount of the individual entrepreneur’s property upon division is less than 1 million rubles, you must pay 2,000 rubles + 0.3% of the price of the subject of the transaction.
2. When the cost of real estate is more than 1 million rubles, but less than 10 million rubles, the tariff will be 5,000 rubles + 0.2% of the amount that is more than 1 million rubles.
3. All property that is more than 10 million rubles - the fee will be 23,000 rubles + 0.1% of the contract amount exceeding 10 million rubles.

The maximum amount of the fee paid to a notary when dividing the property of an individual entrepreneur upon divorce should not exceed 500,000 rubles.

The amount of the state fee when sending an application for division of property of an individual entrepreneur to the court is established by clause 1, part 1, art. 333.19 Tax Code of the Russian Federation. The amount of the duty depends on the value of the property and business of the individual entrepreneur:

1. If the amount is up to 20,000 rubles - 4% of the claim price, but the minimum amount must be 400 rubles.
2. When the value of an individual entrepreneur’s property ranges from 20,001 to 100,000 rubles – 800 rubles + 3% of the price, which is more than 20,000 rubles.
3. If the business value is from 100,001 to 200,000 rubles – 3,200 rubles + 2% of the value exceeding 100,000 rubles.
4. If the claim price is in the range from 200,001 to 1 million rubles – 5,200 rubles + 1% of the limit exceeding 200,000 rubles.
5. Anything over 1 million rubles – 13,200 rubles + 0.5% of the cost, which is more than 1 million rubles.

The maximum fee for dividing the property and business of an individual entrepreneur cannot exceed 60,000 rubles.

For your information

The duration of certification of an agreement on the division of business and property of an individual entrepreneur upon divorce from a notary is not regulated by law; in practice, this procedure takes 2-3 days. The terms of the trial are set out in Part 1 of Art. 154 Code of Civil Procedure of the Russian Federation. If we are talking about dividing the property of an individual entrepreneur in a district court, the duration of the process is 2 months, with a magistrate judge - 1 month.

Is it possible to divide the property and business of an individual entrepreneur after a divorce?

According to the rules of Part 1 of Art. 38 of the RF IC, the division of property of an individual entrepreneur, including business, can be organized both during marriage and after divorce at the request of one of the spouses. Part 7 art. 38 of the RF IC regulates that a husband or wife has the right to submit an application within 3 years from the date of dissolution of the official union. There are no fundamental differences in the procedure for dividing the property of an individual entrepreneur during the divorce process and after it.

The algorithm for dividing the business and property of an individual entrepreneur is as follows:

1. Make an attempt to agree peacefully on the option and duration of the division of the individual entrepreneur’s business and property.
2. If an agreement has taken place, the former spouses need to sign the agreement and have the document certified by a notary. In a situation where it was not possible to reach an agreement, the claim should be filed in court.
3. In a timely manner, carry out the division of the entire volume of property of the individual entrepreneur.

Attention
The difference between the division of property and business of an individual entrepreneur during a divorce and some time after the severance of official relations lies in the volume of the property mass. For example, within 3 years after the divorce, one of the spouses may alienate property and waste funds. Thus, the subject of division will change significantly downward.

Deadlines for dividing property of an individual entrepreneur

You can file a lawsuit or enter into an agreement on the division of property of an individual entrepreneur within three years from the date of divorce or from the moment one of the parties learns of a violation of its rights. After this period, any claims are automatically rejected. After filing a claim, about two months pass before the court makes a decision. By the way, the decision is issued another 5 days after it was announced.

Division of income of an individual entrepreneur upon divorce

Within the meaning of Art. 34 of the RF IC, income from individual entrepreneurs is included in the common property subject to division during the divorce process. The profitable part of the business is subject to distribution between spouses according to the general rules established by the RF IC.

For your information

In order to divide the income of an individual entrepreneur upon divorce, the husband and wife must first attempt to come to an agreement peacefully. This is the best option, otherwise one of the spouses must go to court. As part of the proceedings, the judge establishes the size of the shares of each party, on the basis of which both the property of the individual entrepreneur and the income from it are subsequently divided.

The level of income of an individual entrepreneur when dividing funds between husband and wife must be confirmed by appropriate reporting with a balance sheet. When deciding on the distribution of money, the judge takes into account the financial situation of each spouse, the presence of children and the level of expenses for them.

Debts of an individual entrepreneur during a divorce

Review of judicial practice of the Supreme Court of the Russian Federation No. of 2020 and paragraph 3 of Art. 39 of the RF IC indicate that the total debts of an individual entrepreneur are divided between spouses in proportion to the established shares. As a general rule, all property and liabilities are distributed in the amount of 50% to 50%. In order to divide obligations between spouses, the court must consider where the income from the business goes. If all funds were used to meet the needs of the family, then the debts of the individual entrepreneur during a divorce will be distributed evenly between the husband and wife. In the event that loans and borrowings were taken out to satisfy personal needs, the borrower bears responsibility for the obligations.

Debts when dividing individual entrepreneurs

Running your own individual entrepreneur often means having debt.
Individual entrepreneurs buy equipment on credit or take out a loan from a bank for the construction of a facility. Sometimes debt appears to creditors. All this leaves an imprint on the division of property. By law, all debts of an individual entrepreneur during a divorce must also be divided in half or according to shares in the business, unless otherwise provided by the agreement.

You need to understand that if there is debt to creditors, spouses must notify them of significant changes in life. Often this clause is specified in the loan agreement. You can't just stop paying your debts just because your spouse is getting a divorce. All marital assets and debts are subject to division upon divorce.

Section of receivables of an individual entrepreneur

Accounts receivable are understood as those obligations under which organizations, citizens, states or other persons must return funds to the individual entrepreneur. For example, an entrepreneur provided some service or performed work, but did not receive payment for it. Debt in favor of an individual entrepreneur will be called receivables, and it must be indicated in the balance sheet.

The principle of dividing the receivables of an individual entrepreneur remains the same and is identical to the procedure for dividing income. Obligations for this debt are distributed in proportion to the shares of the spouses. In practice, the judge reserves the right to sell receivables (receipt of funds by the entrepreneur from debtors) to the individual entrepreneur, and the second spouse receives compensation in the form of money or property.

Attention

At the request of the spouses, in the situation of dividing receivables during a divorce, an agreement on the assignment of the right of claim can be drawn up. In accordance with this document, the ability to demand fulfillment of obligations from contractors passes to the ex-spouse. The debtor must be notified of a change in debtor and the establishment of a new procedure for payment of funds.

Risks for individual entrepreneurs upon divorce

If the individual entrepreneur section is not organized correctly, the business of the husband and wife may undergo serious negative changes that affect the functioning of the production business. For example, the sale of necessary equipment, the transfer of most of the assets to the second spouse, may lead to the impossibility of existing business and performing the necessary work and manufacturing the product.

Additional Information

In addition, unlike an organization, an individual entrepreneur cannot have two owners; the business is registered in the name of only one spouse. If the business is transferred to a husband or wife who does not understand the specifics of the work, then the development of entrepreneurship becomes impossible. That is why the courts most often recognize the following position: the individual entrepreneur’s business remains with the spouse in whose name it is registered, and the other party receives compensation in the form of money or property.

Problems and nuances

The procedure for dividing the business and property of an individual entrepreneur is accompanied by a number of difficulties, so in practice, in most cases, spouses resort to the help of lawyers. In order to navigate possible problems, you can pay attention to the following aspects:

1. In the process of dividing the property of an individual entrepreneur, it is necessary to analyze the value of not only the property necessary for the activity, but also income from the business and accounts receivable.
2. If there are any doubts about determining the amount of business and property of an individual entrepreneur, you must seek the help of an appraiser.
3. If the spouses go to court, at any time before a decision is made on the division of the individual entrepreneur’s property, citizens have the right to enter into a settlement agreement. The document is certified not by a notary, but by a judge. From the moment the settlement agreement is signed, the proceedings are terminated and the agreement comes into force.
4. When one of the spouses plans to open an individual entrepreneur, it is recommended to draw up a prenuptial agreement, within the framework of which a regime for dividing the business in the event of a divorce can be established.
5. Litigation most often drags on for a long period of time, so it is necessary to ensure the functioning of the individual entrepreneur’s business. Divorce proceedings can negatively affect the production process, so it is better to eliminate all possible economic risks in advance. In this case, the court should pay attention to the fact that the division of the property and business of the individual entrepreneur will inevitably lead to the destruction of the business.

The process of dividing an individual entrepreneur during a divorce

The division of a business is very similar to the division of common property. The procedure involves:

1. Preparation of the necessary papers confirming the right to an individual entrepreneur (here it will be important when this right appeared - before the wedding or after).
2. Expert assessment of the price of the disputed property.
3. Writing a claim to a judicial institution.
4. Depositing money into the court account as payment of state fees.
5. Court hearing (it is advisable for both parties to attend).
6. Court decision and receipt of the relevant document.

Despite the fact that the procedure for dividing property during a divorce is quite universal, you need to be very careful at the stage at which documents are collected. It is from this stage that depends:

• will the case be won;
• how long the hearing will take;
• whether the business itself will suffer.

Arbitrage practice

In order to understand the features of the division of individual entrepreneurs’ property in practice, it is necessary to consider several court decisions:

1. Citizen P. filed a lawsuit with a request to divide the common property, while the spouses had previously been divorced and a marriage contract had not been concluded. The husband and wife ran a joint business, for which equipment and goods were purchased for further sale and receipt of money. To carry out the activity, the following were acquired: a store building, a plot of land, a car, commercial equipment, non-residential premises, and a share in the right to land. There are also accounts receivable and loans to credit institutions. The judge, having examined the case, came to the conclusion that it was necessary to divide the property of the individual entrepreneur between the former spouses in half. Thus, the woman was given the store, land and car. The man was awarded non-residential premises, a share in the right to land, accounts receivable and equipment (Decision of the Tarnogsky District Court of the Vologda Region No. 2-129/2014 of June 11, 2015).
2. Citizen K. appealed to the court with a claim to recognize the property of the individual entrepreneur as common property. During the marriage, the husband purchased an apartment, the wife was not employed. The man was registered as an individual entrepreneur for a long time, the property was purchased with funds received as a result of the business. At the same time, part of the mortgage debt was covered with funds from the spouse’s mother. Considering the case materials, the judge ordered the apartment to be divided into two equal parts, allocating in kind 1/2 of the real estate to each of the spouses (Decision of the Nizhnegorsky District Court of the Republic of Crimea No. 2-17/2019 dated September 2, 2020).

In modern conditions, the number of citizens registered as individual entrepreneurs is growing. People strive to realize themselves in their own business, receiving income from it. Often, during a marriage, spouses register a business with the tax authorities, which must be divided in the event of a divorce. Due to the fact that a business cannot have several owners, as in an organization, in the process of dividing the property of an individual entrepreneur upon divorce, some difficulties arise. Each reader will be able to see the features of business distribution, the sequence of actions, some tips and indicative sample documents in this article. If some difficulties arise during the division of the business and property of an individual entrepreneur, it is best to contact professional lawyers for advice.

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Debt section

An individual entrepreneur can have both profits and debts. Unfortunately for the other party and fortunately for the entrepreneur, they are also divided during a divorce. Entrepreneurship involves constant risk and therefore everyone should understand that debt is a normal state of affairs. Of course, dividing debts is even more difficult than dividing the profits and property of an individual entrepreneur.

According to Russian legislation, there are many criteria for classifying debts as personal or general. Most often, judges use the principles of the purposes that resulted in the debt. Judges also look at where the individual entrepreneur’s profits went. If the individual entrepreneur spent it on supporting the family and providing it with everything necessary, then the debts are divided equally, or according to the couple’s shares in common things. If the individual entrepreneur spent the money he earned exclusively on himself, then he will pay the debts himself, that is, they will be recognized as his exclusively personal property.

Read: How to divide property after divorce without court