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How to divide a family business during divorce

There are several different ways for divorcing couples to approach dividing a family business during divorce. Dividing a family business during a divorce can be difficult financially and emotionally which is why divorcing couples who have built a business together and share a business should be familiar with the different options available to them.

There are different ways of looking at property division during the divorce process and different methods of addressing dividing a family business. The best option depends on the goals of the couple and their wishes for the business moving forward. Options for dividing a business during divorce include:

  • Both spouses keep the business – this option is probably the least common because it will require the divorcing couple to continue to work together. If the divorcing couple decides to keep the business, they will have to work out who will manage it and a work schedule if they intend to continue working together going forward.
  • One spouse keeps the business – another option is for one spouse to keep the business and buy the other spouse’s interest in the business out. If the spouses seeking to keep the business lacks the liquidity to buy out the other spouse, a structured settlement can be set up.
  • Both spouses agree to sell the business – a third option is for the spouses to sell the business and split the proceeds of the sale. This can delay the divorce while the divorcing couple waits on the sale of the business so divorcing couples should be prepared for that.

If the business is bought out or sold, the price will be based on the appraised value of the business which is why valuation of the business is an important part of the process for the divorcing couple to be aware of. By understanding how property division and dividing a family business works during divorce, divorcing couples can better protect their interests throughout.