Options for dividing a family business during divorce

On Behalf of | Apr 21, 2020 | Divorce

Receiving a fair and equitable share of marital assets is one of the most vital considerations when going through a divorce. It can be a complicated process for high-asset couples, and it can get even trickier when a family-run business is part of the equation.

Dividing a company for which both spouses have profound emotional and economic ties can cause more challenges for an already complex process. At the outset of divorce proceedings, each spouse must determine what, if any, role they want in the business going forward.

Taking a businesslike approach when dividing a company

The first step for determining the future of the company is establishing it’s worth through an unbiased appraisal from a reputable third party. Once that value is specified, the three typical options are:

  • Both spouses sell the company: When both parties want a fresh start, or extra security when approaching retirement, this can be the best option. However, putting a business up for sale can prolong the divorce process extending the business relationship between spouses.
  • Both spouses keep the company: This method can work for those who still get along and are both emotionally and financially invested in the company. However, many divorcing partners find it too challenging to stay in business together.
  • One spouse buys the company: This is the most common method, especially when one spouse ran the business. The purchasing partner buys out the other’s interest based on the appraised value. If they don’t have the capital to buy it outright, both parties can draft a settlement note setting up a payment schedule.

Set priorities when splitting a family business

No single method for dividing a family-run company will work for every couple undergoing a divorce. Some spouses do not have a problem continuing a business relationship with an ex-spouse after the end of a marriage. Others may find it much easier to pursue a fresh start altogether. An experienced family law attorney can guide you through the options for the best possible outcome.