Divorce can be complicated. Who gets primary custody of the children? How much will you receive in child support and alimony? And how will you divide the assets? A divorce can be even more complicated if one of those assets is a business co-owned by separating couples.
Business and marital break-ups happen. But when they occur simultaneously, you better ensure that a solid plan is in place to protect yourself and your business. You wonder: “Who gets the business after I divorce my spouse?” The answer can be straightforward, but always takes a great amount of work and negotiation. During a divorce, you must not only thoroughly understand your personal assets, but every detail of your business assets as well.
Understand the business and protect yourself
When business break-ups include separated spouses, a few options should be considered:
- First and foremost, you need to protect your business. You may think you understand your business, but a thorough evaluation is necessary. This will help you determine its value, whether it can withstand market downturns, and an acquisition price if you choose to buy out your former spouse.
- Staying together as business partners. This is a simple solution for couples who can be civil toward each other. However, this route is not recommended for couples in the thick of emotional and legal battles. When choosing this path, make sure to complete a shareholder agreement that allows either spouse the right to buy out the other at an agreed amount.
- Purchasing the business outright from your former spouse. You can determine whether this is a practical option and whether you are willing to take on the added responsibility as a sole owner. You may have to give up some retirement assets, obtain a business loan, seek out investors or add another partner to make this achievable.
- Selling the business is a solid option in which the former spouses can split the profits and move on with their lives. Maybe you have additional business ideas you are prepared to pursue alone.
Marriage and start-up businesses have another thing in common. Roughly half of each of them fail. (businesses within the first four years). A marital split does not always mean a business split if you co-own a company with your spouse. But you must closely consider every option.