Dividing business assets in a divorce: 3 primary possibilities

Dividing business assets in a divorce: 3 primary possibilities

by | Sep 20, 2023 | Divorce

A business is considered property, so when business owners divorce, the business becomes an asset that has to be addressed in the split – and that can quickly make the divorce pretty challenging.

Assuming that the family business is marital property and no prenuptial or postnuptial agreement exists to guide its division, there are usually three ways to handle the situation, although there are certainly other options available that are used under a variety of circumstances.

One person keeps the business

It’s not unusual for one spouse to be the “driving force” behind a business, while the other spouse has a “supporting” role. In those situations, the spouse who handles most of the operations may wish to continue the business. If the couple can agree on and arrange a buy-out, that spouse can simply purchase the other spouse’s interest in the business or trade it for the value of other assets within the martial estate.

The business is sold to a third party

Sometimes, the prudent choice is to simply sell the business and split any proceeds. This may be the right choice if the business cannot continue without the talents of both parties or when both sides simply want to “cash out” and move on.

The marriage ends, but the business continues

This definitely isn’t for everyone, but couples who are able to end their marriage amicably or compartmentalize their personal and professional relationships may find it possible to continue their operations. Sometimes, couples also temporarily agree to work together until a suitable buyer for the business can be found.

What else do you need to keep in mind?

You can’t begin to divide a family business until you have a clear idea of its worth. That means first deciding which way the company will be valued and who will do the formal appraisal. You and your spouse also each have to decide your personal goals for the future before you decide what you want to do with the business. It’s also wise to take the tax implications of each possible option into account as you make your decisions.

In an equitable division state (including both Missouri and Illinois), fairness is prioritized over an equal split, so there may be other factors that come into play, as well. Because of this, it’s important to get legal guidance that’s tailored to your unique situation to better ensure a fair and favorable outcome.