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What Happens to The Family Business when The Owners Divorce?

Archer Law Dec. 8, 2020

A family business is a source of pride for many couples. That same business can also be a source of stress, however, if the owners decide to divorce. At that point, they’ll have to determine what happens to the business.

If you and your soon-to-be-ex own a business together, it’s time to work together to decide the fate of the company. Here are a few of the options you might consider:

Close the Company

Some people opt to close the company. This is often the case when it isn’t in a position for someone to purchase it and keeping it open isn’t viable.

Sell the Business to Someone Else

Businesses can sometimes be sold if it’s a profitable option for the buyer. When this is the case, the terms of the sale, including who gets what portion of the profits, should be discussed.

One Spouse Buys out The Other

If the business will be kept open after the marriage ends, one spouse may buy the other one out. The terms of this sale should be determined according to a current valuation of the business.

Continue to Run the Business Together

When both spouses are able to get along with each other despite their divorce, continuing to run the business as a team might be a viable option. Making this work means that duties, pay, conflict resolution and similar points of possible contention will have to be worked out at the start.

Regardless of what option you decide is best, you should ensure that the details are spelled out concisely in your divorce agreement. This ensures that there aren’t any misunderstandings and that you’re able to review these terms down the road if there’s ever a question about what should happen.