You and your spouse may have worked in a lucrative family business together for years and have seen significant financial success along the way. Despite your business success, your marriage may have been rocky for some time now and you have concluded that it is best to divorce. This raises a big question though: what are your options for dividing the family business in a divorce?
Option 1: One spouse keeps the business
Sometimes one spouse is interested in continuing with the family business and the other spouse wishes to walk away from the business. When this happens, the spouse keeping the business can buy out the other spouse’s share in the business. The amount of the buy-out will depend on the appraised value of the business. A transfer of property incident to divorce has the advantage of being tax free most of the time.
Option 2: Both spouses keep running the business together
Sometimes both spouses want to keep running the business together after a divorce as they had while married. If so, there needs to be a clear outline on who will be responsible for what to avoid conflict. Also, a couple will need to be on cooperative terms post-divorce and be able to communicate effectively for this option to work in the long run.
Option 3: Sell the business
Sometimes neither spouse can afford a buy-out or neither spouse wants to continue running the family business. When this happens, the spouses may choose to sell the business and divide the proceed. This allows each spouse to move forward into future endeavors with financial freedom. It is important to note that it can take time to sell a business which could mean it will take longer to finalize the divorce. In addition, the spouses will need to agree on how to run the business until it is sold.
Property division is a major part of any divorce. It is important to make sure you know all your rights and options, especially when something as valuable as the family business is on the table. With the right help you can make decisions that are in your best interests both now and in your post-divorce life.
