One of the most major assets that a divorcing couple may have to address is if the couple owns a family business together. Determining how to divide a family-owned business in an equitable manner that pleases both spouses can be challenging which is why it is helpful for divorcing couples to know about the different options for handling a family business during property division and divorce.
Options for dividing a family-owned business
Dividing a family business can require divorcing couples to assess several complex considerations such as the amount of ongoing involvement both spouses wish to have in the business and the best method for dividing the business financially.
There are three commonly used approaches to dividing a family business including:
- Both spouses hang on to the business – if the divorcing couple can continue to work together following divorce, they may wish to keep the business and continue to run it together. If both spouses decide to keep the business, they will need to work out an agreement concerning the involvement of each spouse in the business moving forward.
- One spouse hangs on to the business – the divorcing couple may decide for one of the spouses to keep the business and buy the other spouse out. A structured settlement may be needed if the spouse keeping the business is not able to buy the other spouse out of their interest outright at the time of divorce.
- The business is sold – perhaps the simplest way to divide the interest in the business is for the divorcing couple to sell the business and divide the proceeds of the sale. This process can be delayed if it takes some time to sell the business.
Understand the nuances before making the decision
One of the first steps when determining how to divide a family business during divorce is for the business to be appraised by a third party neutral. Following that, the divorcing couple can consider their ability to work together and financial goals when deciding on the best option for them when it comes to their business and property division.