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What happens to your family business during divorce?

On Behalf of | Oct 28, 2024 | DIVORCE - Divorce

Did you start a family business with your spouse? It’s very common, in part because you already have a natural relationship. If you’re just building up a business on the side, it’s easy for the two of you to work together. Plus, your lives are already intertwined in many other ways, including financially.

As much as this does make sense during a marriage, it can create some problems during a divorce. What happens to the business when the marriage ends? Here are three different options to consider.

1. Buying their share

First off, you can probably purchase your spouse’s ownership share. This would make you the sole business owner. For example, maybe the two of you have been saving for retirement and a business valuation shows that the retirement account is worth as much as the company. You could take over as the business owner while your ex takes the retirement account.

2. Working together

Another option is just to keep working together, as you have been. This may be a good idea if the two of you are on relatively good terms and working together makes the business stronger. You want to keep that business partnership alive, but you just need to redefine it – perhaps with a partnership agreement – in the wake of the divorce.

3. Selling the company

Finally, one of the easiest options is to sell the company. If you do so, then all you have to do is divide the earnings between the two of you. This isn’t ideal if you want to keep the business, but it is a relatively straightforward way to address property division.

Every divorce case is unique, so the best option for you will depend on the specifics of your situation. Just be sure you understand what legal options you have.