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Rombro & Manley LLP

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Options for handling a business division after divorce

On Behalf of | Nov 16, 2020 | Business Divorce

The divorce or legal separation of a couple where one or both own a family business can be complicated on a number of levels.

As we have discussed before, couple who is in the process of dividing a business between the will likely need to have a good idea of the business’s value, which is not always an easy dollar figure to obtain.

However, getting the value of a business is only part of the overall battle. The couple must also agree, or a California family court judge may have to decide, how they will go about dividing the business.

A premarital agreement may dictate how the business is to be divided

Many family businesses and other small enterprises may require owners to have a premarital agreement if they get married. If this is the case, the agreement itself may state how the spouses will divide any business interests.

Otherwise, couples have three basic options

Otherwise, as the American Bar Association notes, couples in the Los Angeles area have three basic options. Exactly how each one of these options would work in a person’s situation is something the person should discuss with an attorney.

Perhaps the simplest thing to do is sell whatever business interest is at stake and divide up the proceeds. The obvious disadvantage to this is that the couple might be cashing out on a business that shows promise of additional growth.

If each person owns and is actively involved in the business, they may wish to explore continuing to work together on the business. While this option allows a business to continue on its present course, it requires the couple to cooperate with each other. Joint ownership may not work in contentious divorces.

Finally, one spouse can choose to buy out the other spouse’s interest in the business. Assuming the couple agree on the value of the business, the trick will be to work out a suitable payout. Doing so may involve, for example, making payments over time, trading other property or taking out a loan from a third party.