A family business during divorce will likely be considered a marital asset and, therefore, subject to equitable distribution. There are several potential ways to handle the family business, but be forewarned: the heated emotions and reactive tendencies couples have during a divorce can cloud sound judgment about the enterprise and other assets.
As hard as it is to stay focused during the turmoil of your dissolution, it’s important to the future of your joint business to keep an open mind about what’s best for the company, not what’s best for egos, spite, or reprisal. You may want to consider hiring an outside manager or business consultant to come in and handle some of the day-to-day affairs until you’ve reached a settlement agreement.
Potential Ways to Handle the Marital Business during Divorce
Approximately 90 percent of all small and large businesses in the United States are family-owned, according to the U.S. Small Business Administration. And because couples often decide to marry sans prenup, it’s quite common for couples to be at a loss as to how to deal with the family business during asset division when divorce is imminent.
The first thing you’ll need to do is obtain a professional assessment of the enterprise to determine its value. You may need to hire an appraiser or certified public accountant to evaluate the company and determine if you should split your investment or approach it another way.
Once the value of the enterprise has been calculated, there are a few ways to approach the family business; which route you and your ex decide to go with depending on your goals and leverage.
- Buyout: If you didn’t have much involvement with the business, you might want your ex to buy you out. Your ex may be able to provide you with a lump sum, you can arrange for a payment plan, or you and your ex may devise a trade agreement that works for both of you, e.g., you keep the business and he keeps the house.
- Sell it: If there is little to no liquidity and little power to borrow or trade, the company may need to be downsized or sold to divide the assets equitably.
- Co-ownership: If both you and your ex remain interested in running the company and you want to maintain ownership, you can create an agreement to make that work. Although continuing to co-own and co-manage a business post-divorce is rare and somewhat complicated, it can be done. Some couples work much better as business partners than marital partners.
Getting Legal Counsel for Asset Division during Divorce
If you own a family business and are getting a divorce, it’s vital to get professional help to protect your financial interests. For a lawyer in Washington with the substantial field experience which takes a thoughtful, creative approach to divorce and asset division, call the Law Offices of Molly B. Kenny for a consultation: 425-460-0550.