The equitable division of property is one of the top concerns during the divorce process. Part of that process may include division of a family business and the valuation of that business the family has worked a lifetime to build. As a result, it is useful to be familiar with how a business is valued and divided during divorce.
When a business is divided during divorce, each of the spouses must determine their ongoing role in the business moving forward and the best option for dividing the business financially. There are several different scenarios for the divorcing couple to consider as options for how a family business may be addressed during divorce and the property division process. During divorce, a family business may be kept by one spouse, divided between the spouses or sold.
Having one spouse keep the family business is the most common way of handling a family business during divorce. When one spouse keeps the family business, they typically buy out the other spouse based on the appraised value of the business. This is also typically a tax-efficient option for the divorcing couple to consider. If the spouse who will be keeping the business does not have the funds to buy out the other spouse, a settlement note can be structured.
If both spouses believe they can continue to work amicably together following the divorce, they may decide to continue as partners in the business. The final option is to sell the business and share the proceeds which may extend the time period for the divorce while the spouses wait on the sale of the business to be completed.
No single option is best for every divorcing couple that must resolve the division of a family business during their divorce. As a result, divorcing couples faced with the question of how to divide their business during divorce should be familiar with the different options and the benefits of each.