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What happens to your family business during a divorce?

| Mar 17, 2019 | High Asset Divorce |

If you and your spouse are a high-asset Missouri couple headed for divorce, your family business may well constitute your largest marital asset as well as your family’s only source of income. This is why you need to carefully consider what to do with it when you divorce.

As reported in Forbes, divorcing couples who own family businesses generally split them up in one of the following three ways

  1. Sale and division of proceeds
  2. Buyout of one spouse by the other
  3. Continued post-divorce joint ownership

Sale

Selling your business and splitting the proceeds may be your best option if neither of you has strong emotional ties to it and would just as soon earn your living some other way. The biggest advantage associated with a sale is that, assuming it goes quickly, both of you will receive a large influx of cash with which to do whatever you wish. On the other hand, you may have to spend a good deal of money getting your business ready to sell. For instance, you likely will need to hire a professional business appraiser to determine the following things:

  • The value of your business
  • The value of each spouse’s respective share
  • The realistic selling price

Buyout

Should one of you wish to continue owning and operating the business after your divorce, (s)he likely will want to consider buying out the other. Here again, you may have to hire a professional to determine the overall value of your business, plus each spouse’s share. Then whichever of you stays will need to come up with a way to buy out the other. One option may be to “buy out” the leaving spouse by means of other marital property. Another option may be to take on a new partner who comes with sufficient cash to cover the buyout amount. Still another option may be to obtain a business loan.

Continued joint ownership

If neither you nor your spouse desires to walk away from the family business, you may wish to consider continuing to jointly own it after your divorce. It goes without saying that this option will only work if both of you can continue working together on a professional level even though you will not be living together on a marital level. If you choose this option, you would do well to have your attorney draft a partnership agreement that sets forth not only which business aspects each of you will be responsible for, but also how a buyout will work if your business partnership comes to an end in the future.

This is general educational information and not intended to provide legal advice.