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How do you divide the family business during a divorce?

On Behalf of | Apr 2, 2020 | Divorce

Marital property consists of everything that you and your spouse acquired together during the marriage. This includes a business that you built together. Divorce requires you to split all marital property equitably, though not necessarily equally. 

According to Forbes, there are essentially three different ways to divide your family business during a divorce. 

  1. Continue to run the business together

While many couples find this too difficult after a divorce, there are others who are able to work out their differences and continue to be business partners even when they are no longer marital partners. Though not a good option for everyone, it does have the advantage of being financially straightforward. 

  1. Sell the business together 

One means of splitting up the business is for you to sell the business to someone else and then divide up the proceeds between the two of you. This may not be a good option if one or both spouses is particularly invested emotionally in the business. It can also prolong the divorce process if the sale takes a while. 

  1. Have one spouse buy out the other

Among divorcing couples who own businesses, this is the most common solution to the problem of asset division. One spouse purchases the other’s interest in the company and either continues to run it alone or else seeks out other business partners. You and your spouse can make payment arrangements via a settlement if there is a lack of liquidity to make the purchase. Because the property transfer is incident to divorce, you may not have to pay taxes on it. 

Before you make any decisions about dividing the family business, you should first have an independent appraisal to determine its value.