According to the most recent estimates, there are approximately 5.5 million family businesses currently operating in the United States. Running a family business can be a rewarding experience, but it can also be a challenging one. If you and your spouse co-own a business together and are considering ending your marriage, there are some important things to keep in mind. You will need to plan your divorce carefully to protect your business interests and avoid any potential disputes down the road.
Valuing the Business is Often the First Step
If you and your spouse co-own a business, the first thing you need to do is determine how you will value the business for the purpose of property division. This can be a complex process, as businesses are often worth much more than their physical assets. You will need to consider the value of the business’s goodwill, any intellectual property it may have, and its current and future earning potential.
There are multiple ways to appraise a family business, including:
Income approach – This approach values the business based on its current and future earning potential
Asset approach – This approach values the business based on its physical assets, such as inventory, equipment, and real estate
Market approach – This approach looks at comparable businesses that have been sold recently to determine the value of the business in question
You Have Several Options for Dividing the Business
Once you have valued the business, you need to decide how to divide it between yourself and your spouse. You can choose to sell the business and split the proceeds, or one of you can buy out the other’s share. If one spouse has taken a substantial leadership role in the business, it may make sense for this spouse to retain full ownership of the company and compensate the other spouse for his or her stake in the company. For example, the spouse who retains ownership of the business may agree to pay spousal maintenance or give the other spouse a larger share of the other marital assets.
You can also agree to continue running the business together. There are certainly challenges associated with this option. However, depending on the nature of your relationship with your soon-to-be ex, it may be a viable possibility. If you do decide to remain co-owners after your divorce, work with a lawyer who can help you formalize your roles in the company and protect your financial rights.
Contact a DuPage County Property Division Lawyer
When a divorcing couple owns a business or professional practice, the divorce process is much more complex. The Wheaton divorce attorneys at Goostree Law Group have over 80 years of collective legal experience. We can help you address ownership of the family business and handle other complicated property division matters during your divorce. Call 630-364-4046 to set up a free consultation.