Getting a divorce can be a long and complex process. For business owners, things can become especially difficult when trying to divide the family business. While there is a lot that you should know about getting a divorce as a business owner, understanding the different outcomes your business can experience may be most important. Here are the three typical resolutions of a family business after a divorce:
When each spouse is entitled to a portion of the family business in their divorce, one spouse may offer to purchase the other’s share. This purchase may be done by exchanging cash between both parties, or by giving up certain assets in the rest of the asset division, such as the family home, vacation home, or other assets.
Whether the divorce is amicable, a buyout offer cannot be agreed upon, or one spouse takes a “silent partner” role in a business going forward, there are many ways to engage in co-ownership. This option can continue for the course of the business or can end with a buyout or sale years down the road.
If both spouses are unable to reach an agreement about a buyout or co-ownership, they might agree to sell the business entirely as the only remaining option. In order for both sides to get their fair share of the proceeds from the sale, an accurate valuation of the business is needed. After the sale of the business, the money from the sale can be split based on the asset division agreement in the divorce.
When you enter your divorce process, it is important to plan for everything, including your business. Consult with your divorce attorney to discuss what option above is right for you and how you can pursue it.