Dividing a business in divorce

On Behalf of | Sep 3, 2019 | Firm News |

As you move toward divorce, it is clear that your largest and most important asset is your family business. You and your spouse started it the same year you got married. You both own equal percentages.

The problem is that you do not know what the divorce means for the company. You loved starting it and you still believe in it. For both of you, it’s your only source of income. How should you proceed? Are you nearing the inevitable end of the company because your marriage didn’t work out, or is there enough separation between that business relationship and your romantic relationship?

Generally speaking, you have three different options. They are as follows:

1. One of you keeps the company and the other sells

Maybe you desperately want to keep the business. Your spouse wants to move on. What you can do is to pay them for their percentage. Rather than selling the company outright and splitting the money, you have a valuation done and pay them what they would make in a sale. This moves 100% ownership into your hands. The company survives the divorce and you get to keep your source of income. Your spouse gets a payout and can move on to the next stage in their career.

2. You both sell to someone else

If you cannot afford to buy out half of the company or if you just want to use the easiest way to divide the business, you may consider selling. A third party pays you the value of the company, you split up the earnings, and you both move on. You do lose your business, but you can start another one with the money you earned. Obviously, this is less than ideal if you wanted to keep that company, but it can work if you feel unsure how to split up the physical assets. Just liquidate them and split the earnings.

3. No one sells and you work together

A final option is to avoid dividing the company at all. Keep running it together, as you did when you were married. Nothing changes. Your business relationship stays alive through the end of the marriage. You keep your income, the company you built and your vision for the future. Clearly, the biggest hurdle here is that you have to make sure you can remain professional and continue to work together even if you do not have a close personal relationship any longer.

Getting started

While considering these three options and deciding what will work the best for you, make sure that you know exactly what legal steps to take and how to get started.

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