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3 outcomes for a family business in divorce

On Behalf of | Mar 19, 2020 | high asset divorce | 0 comments

When a husband and wife run a business together, divorce can mean the end of the company. However, this does not have to be the case. Forbes notes that in a divorce, spouses should seek a professional appraisal for all high-value assets, and a business is no exception.

Once spouses know what the company is worth, the American Bar Association explains that spouses have three main property division options.

  1. The buyout

If one spouse wants to continue running the business and the other wants a fresh start, it may be an option for one to purchase the other’s interest in the company. This will depend on whether the spouse has enough cash or liquid assets to make the purchase or the ability to find a lender and finance the purchase. Or, a spouse may be able to trade other marital assets in exchange for the company.

  1. The sale

The spouses may have to sell the company to a third party and divide the proceeds fairly. Factors that may affect whether this option is viable include:

  • Marketability
  • Economic conditions
  • Profitability

Finding a third-party buyer may take time, so spouses may have to continue working together or come up with some other solution in the meantime.

  1. The co-owners

Some spouses may be able to separate their marital and business relationships and continue to run the business together. Or, they may negotiate some other solution that allows them to remain co-owners. For example, one spouse may run the company, and the other may receive a percentage of the profits. Regardless of the amicability of the agreement, the spouses should create a formal written contract to prevent future disputes.