What Happens to the Family Business During Divorce?
Sometimes the prospect of dividing up assets deters people from seeking a divorce. When you own a family business, property division can quickly become complex. Businesses generate income for the family, but they’re also treated as property during a divorce. Here are three major options to divide a business:
- Co-ownership:If your divorce is amicable and both parties agree, you may want to continue to co-own the business even after your marriage has ended. However, this can be a volatile prospect, especially if you’re not parting on good terms. You’ll need to consider whether you can trust each other to manage the business properly, even when emotions are running high.
- Sell the business:Selling the business and dividing the profits is a good idea when neither of you are interested in continuing the business after your divorce. The main drawback here is that you’ll need to find an interested buyer, which can delay your divorce negotiations. However, cutting financial ties and starting afresh often makes this a tempting solution.
- Buy out your spouse:Finally, one spouse can buy the other’s share of the business. How much of the company belongs to each spouse depends on whether the business existed before the marriage, how much time and money each spouse invested and other important factors. If there isn’t enough cash or liquid assets to purchase their share of the business outright, your mediator can help you find a way to offset the costs through equity, IRAs and 401(k)s or even a structured settlement.
While it can be difficult to let the family business go, often, couples can find a workable solution through mediation. However, you may want to seek independent legal counsel before the mediation process so you understand your rights.
If you’re interested in divorce mediation, contact the experienced Long Island divorce meditators at Solutions Divorce Mediation.