A side hustle may begin as a way to earn extra spending money, but over time, it can develop into a valuable business. When spouses divorce, income and assets associated with these ventures may become important considerations during property division. Even a business operated entirely by one spouse may not necessarily belong exclusively to that person in the eyes of the law in this regard.
This is one of the many reasons why it’s so important to seek personalized legal guidance as soon as a decision to divorce is made. Having informed support can facilitate informed decision-making as the divorce process evolves.
Side hustles: Common considerations
Side hustles take many forms. One spouse might sell handmade products online, operate a consulting business, manage rental properties or earn money through social media content. Others may develop software, provide freelance services or operate an increasingly profitable online store.
Whether a side hustle is considered marital property generally depends on state law and the circumstances surrounding its creation and growth. A business started during marriage may be subject to division, even if only one spouse actively operates it. A venture established before marriage may also raise questions if marital funds or efforts contributed to its increased value.
Determining what a side hustle is worth can be a complicated process. The business might own equipment, inventory, intellectual property or valuable customer relationships. It may also generate recurring income without having substantial physical assets. Tax returns, bank statements, payment processing accounts and business expense records can help to establish earnings and value.
In some cases, a forensic accountant or business valuation professional may be needed to identify assets and assess profitability. For example, they may be able to identify concerns wherein a spouse might underestimate earnings from freelance work or online sales, particularly when payments arrive through multiple platforms. Accurate financial disclosure is essential to achieving a fair property division outcome.
Dividing a side hustle does not necessarily mean both spouses must continue owning it. Depending on applicable law and the nuances of the marital estate, one spouse may retain the business while the other receives different assets or compensation to round out settlement terms. Every case is different, which is another reason why seeking legal guidance personalized for one’s circumstances is so important.