How are family businesses divided during a divorce?

| Sep 7, 2020 | Property Division |

When it comes to divorce, family businesses are considered an asset. As a result, decisions must be made on how to divvy up a family business in a way that is fair to both spouses.

This situation can be emotionally trying, especially if one spouse believes he or she put more effort into the enterprise than the other. There are also obvious financial considerations, particularly if the business is considered a success. As explained here, most couples choose one of three ways to split their family business when going through a divorce.

Selling the business

Once the business has been accurately valued, it can be sold so you and your ex can share in the proceeds. While this is a good option for people who are uninterested – or unable – to keep running the business together during a divorce, it can be a complicated process. Valuing businesses is a complex undertaking, and there may be disputes about the value if both spouses have the business appraised. Additionally, it will take time to find the appropriate buyer. Decisions must also be made about who will assume control of the business until it can be sold.

Keeping the business

This option entails one spouse retaining ownership of the business while buying out the other’s shares. Shares can be purchased outright in one lump sum, or payments can be structured so they are remitted over a specific time period. The spouse who retains ownership of the business is usually the one who was primarily responsible for running it day-to-day, while the other spouse may have been less invested in operational matters.

Sharing the business

Sharing a business with your ex is a much simpler option than selling. The business will be run as it usually is, with each spouse occupying the same roles as they did when they were together. While this option is not as complicated as valuing and selling a business, it can be difficult from an emotional perspective. If you are resentful about the divorce proceedings or your ex-spouse’s conduct during your marriage, you might not be able to work with the person reasonably.