Many married couples who own and operate a small business together take great pride in the venture they have built from the ground up. However, as successful as their family business may be their marriage may not be as successful and they may decide they are better off divorcing. When this happens, they will need to decide what to do with the family business. There are several options.
One spouse buys out the other
If one spouse is interested in continuing the family business on their own and the other spouse no longer wants to be part of the business a buy-out may make sense. In a buy-out the spouse keeping the business will either exchange it for like-valued assets in the property division process or will come up with the proceeds to buy-out their ex’s share in the business. This option only works if the couple has numerous valuable assets to divide or if the spouse keeping the business has enough liquid assets to execute the buy-out or the necessary credit to obtain a loan in order to buy out their ex.
Both spouses sell the business
Sometimes neither spouse has the liquidity or credit to buy out the other or neither spouse is interested in continuing the family business. When this happens, the spouses may choose to sell the business and split the proceeds. To do this, they will need to exercise a certain amount of cooperation despite their divorce. They will need to agree on a selling price. An independent appraisal can help with this. It is also important for them to agree on how to run the business until it is sold as the process for selling a business can take months or even years.
Both spouses continue running the business
Sometimes a couple has a particularly amicable split or neither wants to give up on the family business. In this case the spouses may choose to continue running the business together as co-owners. If so, it is important that the spouses create a plan that outlines each of their responsibilities in the business. This can help avoid conflict.
Learn more about divorce in Ohio
Deciding what to do with the family business is one of the most important decisions a divorcing couple will have to make. Fortunately, help is available in such circumstances. This post is for educational purposes only and does not contain legal advice. Our firm’s webpage on high-asset divorce may be of interest to those who want to learn more about this topic.