During any divorce, a family’s assets must be divided. Some assets, like a savings account could be divided fairly easily, but this is not the case for all assets.
A business is an example of an asset that can be complicated to divide. If a business is determined to be a marital asset, it will need to be valued. How a business is valued and what its value is determined to be can both be points of contention. However, when spouses reach an agreement on value, they will still need to make some pretty big decisions regarding the future of the business after their divorce.
Generally, there are three ways to handle a business in divorce. The spouses can sell the business, remain co-owners or allow one spouse to buy out the other.
Selling the business and dividing the proceeds may be the cleanest way to divide the business. However, it can be devastating to sell a business, which is often much more than a project. It can also be a source of income for one or both spouses. Then the issue of agreeing how to sell it, who to sell it to and what price to sell it for can quickly make the process much more complicated.
An alternative may be for the spouses to remain co-owners of the business after their divorce. However, this may only be practical for spouses who divorce amicably, who can cooperate effectively together and who have clearly defined roles in the workplace.
With the drawbacks of the other two options in mind, it may not be surprising that a third option may be the most popular. This third option involves one spouse buying out the other spouse’s interest in the business. Sometimes, when a spouse does not initially have enough capital, this can be done by trading interest in other marital property, such as a house or retirement account.
Because each family’s situation is different, there may not be only one right way to handle a business in divorce. The best option may depend entirely upon the situation and each spouse’s goals for their post-divorce life.