Dividing your money, debts and property when you divorce can be stressful and confusing. And if you or your soon-to-be-ex-spouse is a business owner, the stakes of property division can be especially high.
Potential options for handling a business
If you own a business together or separately, you and your ex will typically have a few options for what to do with it when you split.
- Continue to share ownership
- Divide or sell the business
- Retain individual ownership
The option that is right for you will depend on what type of business. Is it incorporated or unincorporated? Is it a limited liability corporation (LLC)? Do you own it together?
Categorizing the business is also crucial. Is it separate property or a marital asset? Based on the answers to these questions, you can determine whether a company and its value or assets are subject to division in a divorce in the first place.
Further, having existing plans addressing the future of a business in a divorce will affect how and if you divide a business and its assets. These agreements can include a prenuptial or marital agreement or a business succession plan.
Your relationship with each other will also influence the outcome. For instance, if you are amicable and cooperative, you may be capable of continuing to run a business together. Otherwise, you may need to sever the ownership rights and duties of one or both of you.
Issues that can arise
A business is a complex asset. Unlike a bank account or personal property, you cannot simply divide it in half. Instead, you will likely need to:
- Consult financial professionals to secure a fair business valuation.
- Draw up complete and accurate financial disclosures.
- Determine whether the business or its assets are marital or separate property.
- Consider input from others with a stake in the company, whether that’s family members, partners or shareholders.
- Negotiate settlement, buyout or partnership agreements.
These can be delicate and sophisticated processes, so having qualified professional support help you navigate them fairly and efficiently can be wise.
