Family Business and Divorce. What are our Options?
Family Business and Divorce. What are our Options? A divorce is challenging for many reasons. Beyond the emotional and lifestyle changes, divorce proceedings can become complicated because they involve the division of community property (e.g., property shared by both spouses). One particularly challenging piece of community property is the family business. Divorcing spouses have several options when dealing with a family business, including putting it up for sale, buying out one of the spouse’s interest, or continuing as joint owners after the divorce.
Putting the Business up for Sale
One option for divorcing couples is to sell the business and divide the profits. This option offers a clean break and provides couples with the opportunity to cash in on their investment. However, selling the family business may not be feasible or prudent. For example:
It may be difficult to find a buyer – The process of locating potential buyers, soliciting offers, and finalizing a deal can take time. This may not be an option for couples wishing to divide their property and finalize their divorce quickly. Additionally, some businesses are of a type that cannot easily be sold.
It may be difficult to turn a profit – In some instances, the investment in the family business may not yet have matured. The business may still be in the start-up phase, or a new product may still be months away from shipping. Selling the business at this time may be inopportune.
It may be a primary source of income – For many families, one or more spouses may work at the family business. Selling the business may result in losing the steady source of income relied on for so long.
Buying Out the Other Spouse’s Interest
Another option when dividing a family business is for one spouse to buy out the other spouse’s interest. This option offers a clean separation of the property while allowing one of the spouses to continue to own, operate, and grow the business. The buy-out may include a cash sale. It may also include an exchange of community property. For example, one spouse may take ownership of the family business while the other spouse takes ownership of the family home.
Co-Owning the Business
For divorcing spouses who do not wish to sell the family business, co-ownership is an option. Instead of classifying the business as community property, each divorcing spouse would own a separate interest in the business, making them partners. Because this option requires continued involvement by ex-spouses, it may only work in instances where the divorce is relatively amicable.
Getting Legal Help in Northern California
If you are facing a divorce and are interested in learning more about how your marital assets will be divided between you and your divorcing spouse, Beck Law P.C. can help you. The family law attorneys at Beck Law P.C. can help you determine the best method of obtaining a divorce given your unique circumstances. For a consultation regarding mediation or divorce, contact Beck Law P.C. at 707-576-7175 or visit us online.
See Related Blog Posts: