What happens to the family business in a divorce?

On Behalf of | Sep 29, 2020 | Divorce |

Divorcing couples often struggle when forced to identify every asset and debt they’ve accumulated over the course of the marriage. From the matrimonial home and family cars to retirement funds and the family business, these marital assets must be addressed and, often, divided as the couple begins working toward an independent financial future. Unfortunately, some assets can be complicated by numerous factors.

A family business, for example, must be thoroughly examined before reaching a resolution during the divorce. Not only must the business receive a proper valuation, but the couple must come to an agreement as to what the ultimate division will look like. Generally, the divorcing couple has three paths to explore.

  • The buy-out: One spouse might have a greater interest in keeping the business so he or she – based on the valuation – offers to purchase the other spouse’s stake.
  • Selling the business: The couple might agree that neither wants to keep the business so they will sell it outright and split the proceeds.
  • Working together: Based on their working relationship and any sort of operational agreements they can reach, the couple might decide to keep the family business and run it as co-owners.

While these might be the most common solutions, each couple and every business is different. Based on numerous factors, the divorcing couple might come up with a unique solution that works best for them or a hybrid of the suggestions mentioned earlier. It is wise to thoroughly examine your alternatives during a divorce to ensure you’ve identified challenges and other contingencies.