Going through a divorce is a challenging event that inspires major life changes. When spouses who are divorcing own a business together, the situation becomes exponentially more complicated.
There are a few options available when it comes to addressing the issue of a family business during divorce. Determining which is the most appropriate must be a joint decision. If it isn’t, litigation will be necessary and a judge’s discretion will determine the fate of the jointly-owned venture.
Selling the business
Selling the business and dividing the proceeds between both parties can provide a clean break, which allows each individual to start fresh. This option might be particularly appealing if neither party wishes to continue running the business or if the business can’t easily be divided.
Dividing the business
Dividing the business could mean physically splitting the business assets or restructuring the company so that each party ends up controlling a distinct part of the business. This option requires careful planning and negotiation to ensure that the division is equitable and doesn’t unduly harm the business’s overall.
One party buys out the other
A common solution is for one party to buy out the other’s interest in the family business. This can be an attractive option if one spouse is more involved in the business or wishes to continue running it independently. The buyout can be funded through various means, such as cash payments, a property settlement or even an installment plan.
Continuing to co-own the business
Ex-spouses may decide to continue co-owning and operating the business after the divorce. This arrangement requires a high level of trust, communication and clearly defined roles to prevent personal conflicts from affecting the business. Co-ownership agreements should include how decisions are made, how disputes will be resolved, and what happens if one party wishes to leave the business in the future.
Regardless of what decision is made, it’s critical to consider that this is one part of a property division agreement. Spouses need to carefully assess the situation as a whole to better ensure that they can secure their financial stability when moving forward.