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How are family businesses divided during divorce?

On Behalf of | Apr 16, 2020 | Property Division |

While divorce can be an extremely emotional experience, one of the most vital objectives is to receive a fair and equitable share of marital assets. Determining what’s fair can be complicated, especially for high-asset couples.

The process can be even trickier when one of those assets is a family-owned business where both spouses put a considerable amount of blood, sweat and tears into making it successful. The first step is having each spouse share their intention for the business after the marriage ends.

Options for dividing a family-run company

Before anyone can determine a fair outcome, a value must be set for the business and that is usually accomplished through a third-party appraisal. Once that number is established, there are typically three options:

  • Both spouses keep the company: While less common than other solutions, this approach can work for spouses with deep emotional ties to the company if they still get along. However, many couples find it challenging to remain business partners after a divorce.
  • Both spouses sell the company: Many couples find this the best way to cut ties and use the proceeds of the sale to start their own company or retire. The downside is that selling a company can take longer, extending the divorce process while both parties must try to work together.
  • One spouse buys out the other: This is the most common solution for divorced couples where one spouse acquires the other’s interest in the company based on the appraised value. This is seen as a tax-efficient method. In cases where one spouse lacks the capital to buy it outright, both parties can draft a settlement note, allowing the purchasing spouse to pay it off over time.

Do you stay or do you go?

There is no one-size-fits-all solution for determining how to distribute a family business after divorce. Many spouses can continue a business relationship while others want a fresh start. An experienced family law attorney here in Connecticut can help you achieve the best possible outcome, personally and financially.