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Preserving and Distributing a Co-Owned Business During a Divorce

Asset division during a divorce can be challenging and contentious. And when there is a business involved, the process can become even more complicated. Business owners who are in the middle of divorce have varying options, depending on the structure of their business, when they established it, and whether or not there are prenuptial or buy-sell agreements. But, other considerations come into play depending on the circumstances of the case. This post provides information on the options divorcing business owners have when both spouses co-own the business:

How to Preserve the Business During Divorce

Typically, even a simple divorce case can take a few months to be finalized. A complicated divorce that involves a business co-owned by both spouses may take at least a year. This is a lot of time for a business to shut down if nobody is paying attention to the store or if both parties are fighting over their shares instead of focusing on protecting and growing what they have built. When both spouses don’t agree on certain terms, their business can be at risk of being put under. Thus, they may want to pursue temporary orders to protect their assets’ value as they try to resolve their case. They should work with an experienced Rochester divorce attorney to help them preserve their business assets. 

Business Distribution After Divorce

The distribution of a co-owned business will depend partially on both parties’ goals. However, in some instances, such goals are at odds. Below are the options a divorcing couple has when both parties co-own a business:

  • Buying out the share of the other or swapping other marital property. If a couple chooses this option, one of the spouses will transfer their business interest to the other to get a payment for it or adjust the property settlement. The spouse who gets the share continues to operate the business. If the couple does not have enough cash or marital property, they could structure this agreement in a way that allows the receiving spouse to get a percentage of their business profits for a certain period. Or the buying spouse can pay for the other ‘s share in installment. However, they must ensure the business can be successfully run by one spouse without the other’s support. 
  • Selling the business. If both spouses agree not to keep their business, they could choose to sell it and split the proceeds. 
  • Operating the business together. This option may work for a few couples. But, those who are considering this should be honest with themselves and their spouses in evaluating the workability of this option. Also, couples who continue to co-own their business may have to come up with a more structured contractual relationship than they have probably maintained during their marriage.

 

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