What happens to a business during divorce?

A divorcing couple must navigate numerous compromises and negotiations to reach an equitable split of assets and debt responsibility. Unfortunately, numerous factors can complicate an already-layered situation. One such factor centers on how the spouses handle the family business during the divorce.

Even though every situation is unique, the divorcing couple will generally follow one of three paths when determining the division of the business:

  • Sell the business and split the profits
  • One partner buys out the other partner
  • The former spouses agree to continue running the business together

While the first two options are straightforward, the third path likely represents more of a challenge.

Deciding to keep the business

The couple might make a decision based on an emotional stake, psychological tie or financial stake. If the couple parts on amicable terms and the business lends itself to a natural division of authority, it is not uncommon for the former spouses to retain ownership of the family business. The divorcing couple generally makes this determination for one of three reasons:

  • Both parties like the company, enjoy their jobs and are happy with their compensation
  • Both parties feel like they’ve built the organization to a successful level and enjoy a substantial salary while not putting in a great deal of effort
  • Both parties believe the future value of the organization significantly outweighs the profit they might make by selling in the present

Like any physical asset, online property or intangible financial plan, the division of a family business contains numerous layers and nuances. The couple must decide on the company’s value in the present day and how they’d like to manage it in the future. These can be complex negotiations with the ultimate goal of reaching a beneficial resolution.

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