Who keeps the business in a divorce? It’s a tricky question. Presuming the business is a marital asset, the answer will depend on the value of the business, which can be difficult to determine. Parties must also consider how the division will impact the viability of the business post-divorce.
There are three potential scenarios for dividing a business interest in a divorce.
The most common method is a Buy-Out, where one spouse buys out the other spouse’s interest in the business. The spouse keeping the business will need to pay the other spouse 50% of what the business is worth or give up an interest in another marital asset to equalize the division of assets. For example, the spouse keeping the business could equalize the division by awarding the other spouse 100% of a community retirement account.
Another method is to continue to Co-Own the business. Under co-ownership, both spouses will continue to jointly own the business. If the divorce is amicable, both spouses may be able to continue to work at the business. If a situation is less amicable, both spouses could still retain their interest in the business, but one spouse would be more of an absentee owner and collect payments to satisfy their share of the business. For co-ownership to be a realistic option, the spouses must have respect for and trust each other.
The cleanest way to divide a business in a divorce is to Sell the business and divide the proceeds. This is commonly done with other marital assets such as the family home. The downside to selling a business is that it can take months to sell, especially if the economic conditions are less than favorable at the time of the divorce.
An experienced family law attorney can help you determine the best option for you and your business. Contact The Reape-Rickett Law Firm at (888) 851-1611 or reach out via our Contact Us page to schedule a consultation with one of our experienced attorneys.