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Dividing small businesses during divorce

On Behalf of | Nov 10, 2020 | Firm News

Divorcing spouses have to divide the assets in their marital estate. Those assets can include any family business the ex-spouses run.

Many ex-couples choose from three ways to split their family business when going through a divorce.

Buy the business

The divorcing spouses can decide that one of them will purchase the business shares from the other person. One spouse can buy the shares over a few installments or entirely in a lump sum. He or she will then hold ownership of the business. Depending on what they decide, the ex-spouse who has the majority of the shares is usually the one responsible for running the business. Whoever has a small or no number of the business shares might choose to take on smaller operational roles.

Share the business

A more simple choice is for the ex-spouses to continue sharing the business. This works best if they are still willing to communicate and cooperate. The benefits of this option are the business runs without interruption and each person can keep doing their job as they ran the business pre-divorce. If the individuals find it difficult to work with their ex-partners during their divorce proceedings, it is not reasonable to work together as long-term business partners.

Sell the business

After an expert assesses and assigns a value to the business, the ex-spouses will share the proceeds from selling the business. This option is ideal for people who can no longer run the business with their ex. However, selling the business is a complicated process and the sellers might have a difficult time finding a buyer.

Running a family business post-divorce raises some challenges for ex-spouses but with careful decision making, the business owners can settle any issues peacefully.