Divorce And Business
Dividing property during a divorce can be difficult, but when a family business is involved, the process often becomes even more complicated. A business represents more than just income—it may carry emotional value, future earning potential, and responsibilities shared by both spouses. Whether both parties have a direct role in the business or only one spouse handles operations, the business will likely be subject to review during the divorce process.
Determining Whether The Business Is Marital Property
The first step in dealing with a family business during divorce is determining whether the business is considered marital or non-marital property. If the business was started during the marriage or if marital funds were used to support or grow it, then the business is typically treated as a marital asset. This means it must be addressed during the property division process.
However, if one spouse owned the business before the marriage and it remained entirely separate—without shared funds or joint contributions—it may be considered non-marital. Even then, an increase in the business’s value during the marriage could still be subject to division.
Valuing The Business Accurately
Once the business is identified as a marital asset, it needs to be valued. This is one of the most critical steps, and it often requires input from a business valuation professional. The valuation may consider the business’s current assets, income, debts, future earning potential, and goodwill.
Accurate valuation helps both parties understand what’s at stake and creates a foundation for fair negotiations. Without a reliable number, it’s difficult to divide assets properly or reach a workable agreement.
Deciding How To Divide The Business
There are a few common ways courts or parties may choose to divide a family business in divorce. In some cases, one spouse buys out the other’s share. This allows one party to keep the business while compensating the other through cash, property, or a structured payment plan.
Another option is to sell the business and divide the proceeds. This is less common, especially when the business is the primary source of income or has long-term potential. In rare cases, both spouses may continue running the business together, although this usually requires strong cooperation and clear agreements.
Each option has advantages and trade-offs. A buyout keeps the business intact but requires liquidity. A sale offers a clean break but may result in financial loss or business closure. Continued joint ownership may work for some, but not all.
Tax And Financial Planning Matters
Business ownership brings added financial considerations. Transferring ownership interests, calculating profits, and making adjustments to income can all have tax consequences. Both parties should work with financial advisors and legal counsel to understand these effects before finalizing any agreement.
Future obligations, such as alimony or child support, may also be affected by the business’s value or income potential. Accurate documentation is key, especially if one spouse alleges hidden income or underreported earnings.
Legal Guidance Is Essential
Divorcing with a family business in the mix can add layers to the legal and financial picture. Attorneys like those at Hurst, Robin, Kay & Allen, LLC can attest to the importance of early planning and careful review when a business is involved. From valuation to settlement negotiations, they’ve helped clients reach clear and workable outcomes that protect long-term financial interests.
If you’re involved in a divorce and a family business is part of the picture, speaking with a divorce lawyer can help you understand your rights and prepare for what’s ahead. Taking early steps can make the difference between a smooth transition and a drawn-out legal process.