Dividing your family business in the divorce

On Behalf of | May 11, 2020 | Business Owner Divorce, Divorce |

If you and your spouse are divorcing and you have a family business, you have some difficult decisions ahead. Those decisions will likely impact others, including employees, customers and your community. 

Some businesses are separate property, but if your company is marital property, it is subject to equitable division during the divorce. Here are three ways to split the business. 

Sell the business 

This option allows you and your spouse a clean break from each other, but it includes several challenges. First, it may take a long time to find a buyer, which can drag out the divorce proceedings. Second, buyers may offer less than the appraised valuation, making it difficult for you and your spouse to agree on a selling price. Third, you and your spouse need to continue managing the business while finding a buyer. 

Buy out your spouse 

This is another clean-break alternative. For a professional practice, this is often the option that makes the most sense and entails the least amount of conflict. If you have the license, you keep the business by buying out your spouse. For other types of businesses, such as restaurants or retail firms, you must first decide who will retain the business. That decision may be a source of conflict. The purchasing party must then obtain enough funds for the buyout. 

Retain ownership with spouse 

This option is not well suited for most divorcing couples. However, it can work. If you and your spouse can maintain a productive professional relationship, you may continue in your current company roles. It may be helpful to brush up on communication skills as you develop your new business-only relationship. 

If you prefer not to interact with each other, one of you can retain partial ownership as a silent partner or investor. In this case, one party agrees to limited decision-making input (or none) but still receives a portion of the profits.