FAMILY LAW... & MORE

What will ending our marriage do to our business?

| Oct 16, 2020 | Divorce |

Property division is often one of the most contentious aspects of divorce, especially for business owners. If you and your spouse co-own a business, ending your marriage can be extremely complicated.

Joint ownership does not necessarily mean equal ownership, and you may not have the same level of interest in the daily operations. If you wish to retain ownership of the business, you likely have many questions.

How much is it worth?

Privately held businesses can be difficult to value accurately. A court may calculate a firm’s value according to many factors, including assets, liabilities, income and growth potential. It may be particularly difficult to correctly value a business with more intangible assets than material assets.

How can I buy my spouse’s share of the business?

Once you and your spouse reach an agreement regarding the value of the business, you may move on to the next phase of negotiation. If you wish to retain the business and your spouse is ready to let go of it, you can proceed with a buyout.

You may buy your spouse’s share of the business in a lump sum payment. Doing so may require you to refinance the firm or sell assets. If a lump sum is not practical, your spouse may agree to smaller payments over time.

Are there other options?

If the company is large enough, you may split it into two. Each party may then retain ownership of one firm.

Alternatively, you may keep your spouse as business partner. In this option, your spouse retains a share of equity in the business and receives a share of the profits. You may wish to structure the deal so that your spouse would be a silent partner, with no decision-making power.