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3 Ways To Divide A Business In A Divorce

28 January 2015

Alexis Garcia

Dividing assets in a divorce can be especially tricky if you and your spouse own a business, even if your spouse owns and runs it without your help. In marriage, a business owned by either spouse is normally considered a mutual asset and must be divided during the divorce proceedings. If you are not sure how you will handle this task, here are three choices you can discuss with your lawyer and with your spouse.

Let One Spouse Keep It

Letting one spouse keep the business during a divorce is often the choice a couple selects, but it doesn't mean that the other spouse gets nothing from it. In fact, the other spouse will be entitled to 50% of the business, which means that you must know how much the business is worth.

Determining a business's worth often requires getting a business valuation appraisal. According to Bloomberg Businessweek, a business valuation may cost anywhere from $3,000 to $40,000. If the business is relatively small and has few assets, you may be able to get a valuation completed for less than this though.

The purpose of the business valuation is to determine exactly how much the business is worth, and this valuation takes the following factors into consideration:

• Assets
• Income
• Current demand for the products or services provided by the business
• Reputation

Once the value is established, you and your spouse could divide it in half. This would require the spouse that is keeping the business to pay the other spouse half of the value. You do not have to agree to divide it exactly in half, but both spouses are legally entitled to receiving half of it in most cases.

One downside to this option is coming up with financing. If your spouse must pay you 50% of the business's worth, will he or she be able to come up with the money? If not, you may have to agree to accept payments over the next five years or so.

Both Spouses Keep The Business

The second option you have is for both of you to keep the business. In this case, a business valuation would not be strictly necessary because you would not be dividing the business. This option works great for couples that both actively participate in the business, and you may want to consider doing this if you:

• Will not mind working with your spouse after the divorce is through
• Do not have any other skills
• Plan on relying on this income to survive
• Love this line of work

This is not a good idea to choose if you cannot get along with your spouse, but it can work for some couples.

Sell It

If neither of these options is feasible, you could consider selling the business. This is often the easiest way to divide a business in divorce; however, it is not always the best option. The first problem created when selling a business is finding a buyer. According to Selling Your Business, it usually takes around 12 months to sell a business, but there are times when it can take much longer than this.

The benefit of this option would be that you could both receive equal checks when the sale closes, but it may involve taking a loss on the sale just to get it to sell fast enough.

Before you choose one of these options or a different one, talk to a divorce lawyer. By doing this, you can find out exactly what you are entitled to, and this could help you choose a method that divides the business in a way that is fair for both of you.

Visit http://www.glfamilylaw.com for more information. 

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