Deciding the fate of the family business during a divorce

On Behalf of | Mar 12, 2020 | Divorce & Family Businesses

Perhaps you and your spouse made a fledgling business into a great success. However, the future of your enterprise is now in doubt due to your impending divorce. 

Here are points to consider and three options as you contemplate the fate of this important asset. 

Sell the business 

Perhaps the most obvious option is to put the business on the market. To arrive at an appropriate selling price, you will first have to hire a business appraiser to perform a valuation. If you and your spouse can agree to hire just one appraiser, you can split the cost. Then, when the sale is complete, you can split the profits. 

Buy out your spouse 

Another option is for one of you to buy the other out. You may have more invested in the company in terms of time spent with day-to-day operations and building the company brand, and your spouse may have more of a financial investment. If a buyout seems a good idea, you will again need a valuation to determine the price. Keep in mind that if the buyer cannot come up with the necessary funds, the seller may agree to a like exchange in other assets. 

Continue as owners 

If you and your spouse believe you can work together once the divorce is final, continuing as co-business owners may be the best solution. Two benefits come immediately to mind: You would both keep your respective interests in the company, and you would not have to incur the expense of a valuation. 

Other considerations 

If a prenuptial agreement exists that addresses the disposition of the company in the event of a divorce, or if you have a business agreement to that effect, the way forward will be clearer. Otherwise, you and your spouse have a decision to make. If you cannot agree, a family law judge will determine what happens to the business, taking into account factors such as the length of your marriage and the amount of involvement each of you has in the company.