What Will Happen to the Family Business in Your Divorce?
Running a business with your spouse can be lucrative and rewarding – that is, until the marriage sours. If a marriage is not reconcilable and you are thinking about divorce, it is important to consider what will happen to the family business. The answer will depend on your specific circumstances, including your wishes, your spouse’s wishes, your property and assets, and more.
Division of Property in a Divorce
State law requires that the property and assets acquired during a marriage must be divided equally between the spouses should they divorce. A business is likely the largest asset – or one of them – that you have, so consideration should be given to how this asset is divided. There are different options for the division of a family business, each with its own benefits and drawbacks.
Sell the business – In some cases, the most practical solution is to sell the business and divide the profits. This will mean you will lose your income stream from the business, which may be your primary source of income, so that may be a concern. However, you may be able to use your share of the profits to start a new enterprise.
When selling a business, it is important to have it professionally appraised so you sell it for an appropriate price. One risk is that it may take some time to sell the business, during which you may still have to work with your ex-spouse until it sells. There also may be tax implications of selling the company that should be considered.
One spouse buys out the other spouse – If one spouse wants to keep the business running, they may buy out the other spouse’s ownership interests. The selling spouse can then use those funds to start a new company or for financial support until they find other employment. Similarly, you always want to have the business appraised prior to a buyout so both spouses know that the price is fair.
It can be difficult for one spouse to have the funds to purchase the other’s interest in the business, so you may consider using other marital assets to offset the cost. For example, the purchasing spouse gives up their equity in the house or financial accounts in exchange for the business interests.
Continue to be co-owners – Continuing to work together might sound crazy to some divorcing couples but others may be capable of amicably serving as co-owners. Just as ex-spouses can co-parent successfully, they may still be able to work together in a professional manner. This can be beneficial as no costly appraisal of the business will be necessary and neither spouse will have to find a new source of financial support. It is important to be realistic when deciding whether you will be able to work together in a healthy and successful manner.
Contact an Experienced Divorce Attorney for More Information
When dividing property and assets such as a family business in a divorce, the guidance of an experienced divorce lawyer can be essential. We can help resolve the many different issues that may arise in your divorce case, so please contact our office to learn more today.