Running your own business gives you the freedom you can’t find in a regular 9-5 job, but what happens to a company you share with your spouse when the marriage comes to an end? Depending on the circumstances, the business could be considered marital property, even if you’re the main provider. Here’s how you can expect a jointly owned business to be split.
There are approximately 4 million businesses in the United States that are jointly owned by a husband and wife. After a divorce, it’s usually not an option to continue working together. Depending on how the business is run, it may or may not even survive the turmoil of the divorce process. For example, if one spouse is a medical professional and the other runs the office, the office position may be outsourced. However, if both spouses are graphic designers or operate another type of small business, the company may need to be dissolved or divided.
When it’s determined that your business must split, one spouse may be required to buy the other out. The best thing to do in this situation is to have the business valuated to determine its worth. If the spouse keeping the entire business cannot afford it outright, concessions can be made such as exchanging the business value with other marital assets or structuring buyout payments over time. Ideally, both spouses need to be able to support themselves and fund their retirement. If a decision absolutely cannot be made, some couples sell the business and share the proceeds.
To avoid problems down the road, many couples create a prenuptial before getting married or a shareholder agreement shortly after the business is formed. These documents can help establish a plan and diminish your time spent in court. Lengthy court battles can be expensive, potentially bankrupting a company and leaving both spouses without the money they have worked so hard to earn.
While running a business with your spouse may have seemed like a great idea when the relationship was solid, it can a major point of contention when you decide to divorce. Whether you’re the foremost operator of the service or it’s an even split, you’ll likely have some tough decisions to make. Will you dismantle your business or accept a buyout payment? Contact Easterling Family Law for a team who can guide you through the monetary aspects of your business in this difficult time. You can reach us at 980-272-1365.
