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What are your options when dividing a business during divorce?

On Behalf of | Jul 8, 2024 | Business Law, Divorce |

Divorce can be tough, especially when you and your spouse own a small business together. The business that you built together can become a contentious asset in divorce proceedings. However, there are several approaches that you can consider to manage this situation as smoothly as possible. What strategies might you take to handle a small business in your divorce?

1. Negotiate a buyout

One straightforward way to deal with a jointly owned business is for one spouse to buy the other’s share. This turns the buyer into the sole owner. The spouse who buys the share might pay cash or trade it for other assets of equal value. It is crucial to get a fair and accurate valuation of the business by a neutral expert to make sure everyone agrees on a fair price.

2. Sell the business

If neither of you wants to keep the business or can afford to buy the other out, you can sell the business and split the money. This option works well if both of you want a clean break or if neither of you can afford to buy out the other.

However, finding a buyer can take time, with most sales taking between six months and one year. This might slow down the divorce process. It is also important to keep the business running well during this time to preserve its value.

3. Continue as co-owners

Some divorced couples decide to keep running the business together. This can work if you both respect each other and can set clear rules and boundaries. Co-ownership requires you to communicate well and handle any personal issues without letting them affect the business. Setting up a formal business agreement that details your roles and how to handle disputes can help keep things smooth.

4. Restructure the company

In some cases, it might be possible to split the business into two separate parts that each spouse can run independently. This depends on the type of business and whether it makes sense to divide it this way. Both parties will need to agree on a fair way to split the assets, and legal advice is essential to make sure the new companies you form are viable.

Choosing the right legal strategy can help you manage your small business during a divorce in a way that is fair to both parties and protects the business itself.

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