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Options for dividing family business assets during divorce

Posted on in Divorce

Couples who own businesses together may be hesitant to proceed with a divorce, even if their relationship has broken down to the point of being irretrievable. Staying together for the business is not likely to be a long-term option.

But what options are available when it comes to divorce and the family business? According to U.S. Census Bureau data, this is not an uncommon question. There are about 3.7 millionhusband-wife co-owners operating businessesin the U.S. Here are three options that a couple may consider before they head to divorce court.

  • Sell the business before the divorce: Many people view divorce as a chance to get a fresh start. By selling the business, the couple may gain the means to go in different directions, whether that be to start a new business, go back to school to begin a new career or find work in an established company. The downside to selling the business is that it may take time to find a buyer, and this could prolong an unsatisfactory marriage.
  • One spouse buys out the other: Often, one spouse is more invested in the business emotionally or has a greater personal or career advantage in keeping it going. In that case, it may make sense for the couple to exchange assets for business interests or for one spouse to get a loan and buy out the other. An independent business valuation will be necessary to ensure a fair division of property.
  • The couple continues to operate the business together: Some people are able to separate their marital relationship from their business relationship. If a couple decides to continue their business relationship after the divorce, a buy-sell agreement is essential. If their relationship deteriorates, one spouse has the right to buy out the other at a price that they both agree is fair.

No matter which option is chosen, dividing business assets is very complicated, especially for those who live in a community property state, such as Texas. Legal counsel is highly advised.

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