Figuring out what to do with a business in a divorce can be a complex task under any circumstances. It can be especially challenging when the two co-spouses co-ran the business prior to the divorce.
There are multiple ways a business that now-divorcing spouses co-ran can be dealt with in a divorce. Today, we will go over three of the main ways. Each way has its own potential issues and challenges connected to it.
One way is for the divorcing spouses to continue to co-own and co-run the business. Given the bad feelings and lack of trust a divorce, even a fairly amicable one, can generate between a couple, this route can definitely have its challenges. Things that can be important issues when it comes to this option include figuring out how to prevent personal feelings over the divorce from harming the business and how the business relationship and roles of the divorcing parties should be adjusted after the divorce to best serve the business’ interests.
Another route is for one of the spouses to get full control of the business, with the other spouse getting other assets in exchange for relinquishing their share of the business. Things that can be challenging with this option include: figuring out which spouse will get the business, determining what assets the other spouse will get in exchange (this could raise some complex business valuation issues) and dealing with the possibility of the spouses becoming business competitors in the future.
The third main available option is to liquidate the business and then divide up the proceeds. Sometimes, a divorcing couple is simply unable to come to an agreement acceptable to both of them that would allow the business to keep going under one or both of them. When going the liquidation route, big issues include how the liquidation will occur and how specifically the proceeds of the liquidation will be divided.
Attorneys can help divorcing individuals who have co-run a business with their soon-to-be-ex with figuring out which option for dealing with the business would be the best fit given the situation and their goals and assist them with navigating the issues specific to the route they eventually decide to try taking.
Source: The Wall Street Journal, “How to Keep a Business Alive After a Divorce,” Andrew Blackman, Jan. 24, 2016