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What should you do with your business ownership in divorce?

There are many issues in every divorce. Almost all of them will impact the spouses and children for the rest of their lives.

Of all these important, life-altering decisions, one of the most challenging can be deciding what to do with a business owned by one or both of the couples.

Questions When Both Spouses Own the Business

When both spouses have ownership interests in a business – which is most common when a family starts a business as a joint venture – they should ask themselves some important questions:

  • How important is this business to us? For many business owners, the company can be a critical source of income, especially is the business is successful. Many owners also see the business as their legacy, something they are extremely proud of and don’t want to liquidate.
  • Can we continue to operate the business together after a divorce? If you and your spouse are unable to get along well enough to stay married, it is possible that working together closely in day-to-day business operations will be impossible. Even if you can find a way to do it, it might cause significant stress in your life.

Questions if You Are the Sole Owner

If you are the only one in the marriage with ownership interests in the business, one of the first considerations is whether you should liquidate or keep the business running. The questions you ask yourself will be similar but with different emphases:

  • How much are you willing to sacrifice to keep your business? Every divorce negotiation involves give and take. You need to prioritize what is most important to you and be willing to sacrifice other terms of the divorce in order to retain this important value. If keeping the business and keeping your spouse out of it is the most important thing to you, you will likely have to give up other values in the divorce.
  • What is the smartest financial decision? In some cases, deciding what to do with a business comes down to a purely financial decision. Even if you are emotionally attached to your business, it might be a better financial decision to liquidate and move on.
  • Would you be able to rebuild a similar business if this one were to be liquidated? Some business owners are willing to liquidate and simplify the divorce process because they are confident they can re-establish another similar business that will also be successful.

Questions for Spouses Who Dont Own the Business

If your spouse is the sole business owner in the marriage, your questions will be significantly different:

  • How interested are you in being involved in the business? Some spouses in your situation will fight to take over split ownership with their spouse. But if you haven’t been involved thus far and don’t have the skills or interest to handle the business, this approach will not make you happy in the long run.
  • Is it better to push for liquidation or profit split? If the business is successful and is likely to continue succeeding, it might be best to push for a profit split of some kind so you can add value long term. On the other hand, in a moderately successful business, you might get a better return by pushing for the liquidation of the business.

Seek Counsel

Whatever situation you find yourself in regarding business ownership in divorce, the most important thing you can do is talk with an attorney you trust. A skilled and experienced lawyer can talk through the various options with you and help you get the best outcome possible.

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