Brown Borkowski & Morrow


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3 options for keeping a business open after divorce

Couples who share a family business will often work together to grow the company. This is often a viable system until the marriage dissolves and they have to determine what to do with the business. As part of the property division process, they will decide what happens to the company.

One of the first tasks is to determine whether it is covered by a prenuptial agreement. If it is, the terms of the agreement will be followed. In the absence of a premarital agreement, there are a few options that might be viable for the business if it is going to remain open.

Continue to co-own the company

Some people who go through a divorce can continue to work together in a professional capacity. If this option is the one that’s used, roles for both parties must be clearly defined. This should be put in writing so both individuals know what they are responsible for. The division of profits or pay information must also be covered in the contract that’s written up.

Sell the company to a third party

It’s often a good idea to sell the company. This can provide both parties with a financial boost that can help them to start out their new life. It may also make the property division easier since they won’t have to try to finagle the offers around the value of the business like they would if one person bought the other one out.

One spouse buys the other out

The final option is that one spouse buys the other one out. This is usually only suitable if there’s enough available liquid assets in the marriage to cover the buy-out price for the business. Some individuals prefer this option since it keeps the company functional without the divorcees having to work together on the business.

Determining the best option for a family business during a divorce isn’t always easy. You have to be able to consider things like the tax implications and how the arrangement will impact your financial state. Reviewing the options can help to ensure that you’re doing what you feel is best for your needs during the property division process.