Business valuation and dividing a business during divorce

On Behalf of | Dec 16, 2020 | Business Valuation

It may be helpful for divorcing couples who own a family business together to be familiar with the different options for addressing a family business during the divorce process. There are several different options to consider to divide a family business.

One spouse keeps the business

If one spouse wants to keep the business, they can buy out the other spouse’s interest in the business. The spouse wishing to keep the business is usually the spouse who runs the business and will buy out the other spouse’s interest in the business based on the appraised value of the business. This requires a business valuation to be performed. If the spouse wishing to buy out the other spouse’s interest does not have enough liquid assets to purchase the business interest outright, they can structure a settlement to be paid off over time.

Both spouses keep the business

If the divorcing spouses are able to continue to work together following the divorce, they can both retain ownership of the business. This can be a less common option, as many divorcing couples are unable to work amicably together following their divorce.

The spouses sell the business

If both spouses wish to sell the business and divide the proceeds, it is another option they can consider. This can delay the divorce, however, while the divorcing couple waits on the sale of the business. Once the business is sold, the divorcing company can share the proceeds.

Dealing with a business during the divorce and property division process can be emotional and stressful for divorcing couples. For that reason, it is helpful for them to understand how the property division process can help them address their family business and to also understand the business valuation process they should expect to be part of the process.