Select Page

Tennessee uses an equitable distribution system, and dividing a family business during a divorce proceeding may require careful planning and consideration. The court views property and assets — including a business — obtained during your union as marital property.

A family court judge generally divides marital property by what is “fair” and may not decide on a 50-50 division between both spouses. Depending on your circumstances, you might find yourself either owning the business entirely or not owning any part of it.

One method for dividing a small business is by selling it and splitting the proceeds with your soon-to-be ex-spouse, as noted by Forbes magazine. Selling a business may help with plans for retiring or starting a new company. If you decide this is the most practical method, it may result in an equal division of the amount left over after paying taxes, liabilities and other business obligations.

Valuing a business before a divorce

An appraisal or valuation can help you to sell your business successfully. Obtaining a business appraisal may benefit you even if there is no intent to sell it. If you plan on taking complete ownership of your company after the divorce, the court may order you to pay your spouse for his or her share. Much like buying out a partner, the court may require a payment to your spouse that reflects a fair market value in order for you to take sole ownership.

Negotiating before the divorce process may help avoid a contentious battle over plans for your family business’s ownership. If you operated the business without your spouse’s assistance, you may need to present evidence to avoid a dispute.

The information provided is for educational purposes only and not intended as legal advice.