Among the many things that can complicate a divorce, a family business stands out considerably. The law dictates that marital property must be divided fairly, but how does that affect your business?
If the business in question is deemed to be marital property (acquired by the couple during the marriage) considering each spouse’s contributions and other factors, it will be subject to property division.
3 options for a family business in a divorce
Laws pertaining to divorce vary from state to state. In Kentucky, the three most common options to deal with a family business in a divorce are the following.
1. Selling the business
Selling a family business you have worked long and hard to build might seem like a painful prospect at first. However, many divorcing couples find that doing precisely this is a big step to moving forward with their lives. The proceeds from the sale of the family business can help you start a new business, buy other property, or otherwise boost the quality of your new life.
2. A buyout
If one of the two spouses simply cannot walk away from the business, buying the other one out is an option. Once the company’s value has been professionally established by an evaluator, either of the two spouses can buy it outright with capital or exchange it for other property. This can help you keep other marital property that is more important to you than the business.
3. Joint ownership
Not all divorces end with fighting and bitterness. If you and your spouse are divorcing amicably and get along well, continuing to own the business together can be considered.
Bear in mind that to make this work properly, a legal partnership agreement should be drafted. This agreement should include a buyout option in case either of the two wants to go on to other things in the future.
Ending a marriage through a divorce can be a painful experience, especially when you are not sure how it will affect your business and what lies ahead. Legal assistance is useful in this situation and can help you learn more about options for your business.