Going through a divorce can be an extremely taxing and expensive process, especially for business owners. When the average cost of a divorce can cause a spouse to suffer thousands of dollars in expenses or more, they need to be sure they are doing everything in their power to prepare for the future. Part of that preparation requires spouses to know what to expect when it comes to their business, so what can happen to a company that is involved in a divorce?
The typical results
When spouses face property division in a divorce, the family business is not immune from this process. Depending on the goals that each spouse has, a business typically faces one of three different outcomes:
- Buyout – when only one spouse wants to keep ownership of the business, they have the opportunity to purchase their spouse’s portion. In order to do this, it is common for spouses to get an accurate appraisal of the company first. Once the spouses come to an agreeable and accurate value for the company, they can negotiate for the portion of the business that the spouse is parting with.
- Sale – if both spouses do not want to keep the business, they can agree to sell it. The money from this sale becomes a part of the property division, but the money does not have to split at a 50-50 ratio. Experienced attorneys can help make a case for stating that a spouse owned a smaller portion of the business than half due to lesser contributions to the company’s success.
- Co-ownership – both spouses want to continue owning their company; they can choose to do so. The company may experience business as usual after the divorce, or the dynamic of ownership may change. In some cases, one spouse may pull back from their previous duties and assume a more passive role in the company while still collecting their share of the income.
Recognizing your preferred outcome for your business helps you prepare your negotiation efforts to secure that outcome. Going into negotiations with blind expectations is a dangerous mistake that can leave you with years of regret following your divorce. Be sure you are doing your part to ensure that you are pursuing the best possible outcome in your divorce.