Navigating divorce when a couple owns a business

May 4, 2023

Divorce, Firm News

Divorce can be a complex and emotional process that can become even more complicated when a family business is involved. Couples who own a business must navigate a minefield of legal, financial and emotional issues when they decide to end their marriage.

Will it be business as usual? Who will retain control now that you no longer run operations as one unit? These are some of the questions you may have in such situations. Unfortunately, there is no straightforward or conclusive answer due to the unique circumstances of every divorce.

What are your options?

Suppose you do not have a legal agreement that specifies what will happen to the business if you divorce. If that’s the case, you have these options:

  • Sell the business and divide the proceeds with your spouse based on each party’s stake.
  • Buy out your spouse’s interests stake in the business.
  • Continue to run the business as partners.

When the divorcing spouses are the only owners of the business, then it’s up to them to decide the fate of the business. There may not be much choice in some circumstances. For instance, you may not have the money or means to buy out your spouse who wants out of the business. The only choice in such a situation is to sell the business.

The potential challenges of dividing a business in a divorce

One of the most significant challenges of divorce in a family business is determining the value of the business. It can be a contentious issue since one spouse may feel short-changed if the business is undervalued, while overvaluing it can lead to unrealistic expectations and financial hardship.

Establishing each spouse’s stake in the business can also be problematic especially if there is no clear ownership structure. Your spouse is legally entitled to a stake even if they were not involved in the day-to-day operations. Taking care of the family and providing you with indirect support also counts.

Get the necessary help to protect your interests

Navigating divorce in a family business requires careful planning, communication and experienced legal guidance. That way, couples can minimize the damage to the business and move forward with their lives.