If you and your spouse are partners in the family business, its fate will become a major question during the property division phase of your divorce.
A prenuptial agreement may spell out the disposition of the business. However, if no such agreement exists, you and your spouse must make a decision. Here are three options to consider.
1. Sell the business
Putting your business on the market may be the first idea that occurs to you. To do this, you need to engage a business appraiser to perform a valuation. Once you know what the business is worth, you can determine the proper selling price. Keep in mind that selling may take a while. In the meantime, you and your spouse will probably have to keep working together. Once the sale is complete, however, you and your soon-to-be ex-spouse can divide the profits and go your own way.
2. Buy from your spouse
You may have more invested in the business than your spouse financially, emotionally or practically. Therefore, you may want to buy your spouse’s share and become the sole owner. Once again, you need an appraiser to perform a valuation so you can determine a fair price. You also need to come up with the funds for the buyout. If that is not possible, consider giving assets of like value to your spouse in the divorce settlement. Of course, the buyout option works in reverse if you are the one who would rather sell.
3. Continue as partners
If you and your spouse anticipate an amicable divorce, you may think about continuing as business partners. This is not a path everyone can take, but it may be the best solution if you believe you can work together once the divorce is final. You would not have to incur the expense of engaging an appraiser for a valuation, and you would both keep your respective shares of the business.
There are pros and cons to all three choices. Explore your legal options and rely on sound professional advice to help you make a decision that works for both you and your soon-to-be-ex.