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Dividing the family business in divorce

On Behalf of | Jul 27, 2021 | Divorce |

Divorce likely means an upheaval in all aspects of an individual’s life. From spending power and parenting time to property and vehicles, the divorcing couple must thoroughly examine assets and debts to reach an equitable split. For many couples, a family business represents the most significant piece of their overall financial picture.

No matter the size, scope, age or profitability of the business, the divorcing couple will likely have strong feelings about how to approach the property division process. While every divorce is unique, the couple will commonly face three options when deciding how to divide the business:

  • Sell the business and split the profits: It is not uncommon for the divorcing couple to decide a clean break is necessary. This can impact all facets of their life including the business. Often, the couple will simply sell the organization and split any profits.
  • One spouse buys out the other: In many marriages, there is one spouse who has invested more time and effort into the growth of the family business. In these situations, it is not uncommon for one spouse to buy the other spouse’s stake in the organization so he or she can run it independently.
  • The divorcing couple remains co-owners: In what might be the most uncommon of the decisions, the couple might decide they can both stay on as co-owners of the business – running it together and sharing in future profits. The couple will proceed with a strict division of responsibility and slight retooling of the operational documents.

The overall financial landscape will largely impact these decisions. For example, one spouse might give up a stake in the business in exchange for sole ownership of the matrimonial home. These property division negotiations can be complex, best handled by an experienced legal professional.