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How are small businesses divided during divorce?

| Oct 7, 2020 | Divorce

During a divorce, both spouses divide the assets. Since the business is an asset, both parties need to decide how to divide the business. Both spouses must agree the decision is fair.

If one spouse believes he or she put more effort into the business than the other, the decision-making process might be emotional. Many spouses decide between one of 3 ways to split the family business when experiencing a divorce.

Share the business

Sharing the business is a simple option. The business often runs without interruption and each spouse can keep the roles they usually had before the divorce. Emotionally, this is a difficult option because divorces are hard to navigate. The divorce proceedings or pent up resentments can make it hard to work with your ex-spouse reasonably in the long run. Consider other options if the divorce proceedings were especially tough for you and your spouse.

Keep the business

One spouse will hold ownership of the business and buy the shares held by the other person. The spouse can purchase the shares in a lump sum or install payments so they are repaid over a decided period of time. The spouse who holds ownership of the business is usually the one responsible for running it. The other one who sells their shares is the one who had roles in smaller operational matters.

Sell the business

With this choice, you and your ex share the proceeds of the business after it is accurately valued. This is a good option for people who are unable to run the business together, but this is a complicated process. Also, this might take a lot of time to find a buyer.

Divorce brings uncertainty and conflict when there is a family business, but they can settle the issue peacefully after some decision making.