3 options for divorcing couples who co-own a company

by | Jan 6, 2020 | Divorce

Divorce is often a threat to the continuation of a family business. One way or another, your company will change. However, you and your spouse may be able to come up with an agreement that allows both of you to move on without losing everything.

Forbes notes these three options you and your spouse should consider before deciding what to do with your co-owned company.

  1. Sell the business

It may be impossible for either of you to maintain and run the family business without the other, or both of you may want a fresh start. Selling the business and dividing the proceeds may be the answer. You will need to hire a business appraiser familiar with your type of company so that you can sell the company at a fair price.

  1. Arrange a buy-out

One of you may have a stronger tie to the business. For example, perhaps the original concept was yours and you have more emotional investment in the business, or perhaps your spouse has fewer career options outside of running the company. One spouse may have the option to buy out the other’s interest and keep the company.

This may involve getting a loan to make the purchase, exchanging assets for interest in the company in the property division phase of the divorce or using liquid assets to make the purchase. Regardless, you must get a fair appraisal of the company’s value from a professional before the buy-out can happen.

  1. Keep the business

Maintaining a business relationship may not be the obvious solution, but some people make it work. However, even if you and your spouse decide you can continue to co-own the business, or if you have to because selling now would be a financial disaster, you probably still need to make some changes. Re-evaluate your partnership agreement based on your new relationship status and determine whether modifications or a completely new agreement is in order.