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Dividing a Jointly Owned Business in Divorce: Your Options & Steps

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After a divorce, a jointly owned business is typically treated as marital property and must be divided, as continuing to operate together is rarely realistic for former spouses. For the approximately 4 million businesses in the United States jointly owned by a husband and wife, common solutions include one spouse buying out the other based on a professional valuation, restructuring roles, or selling the business and splitting the proceeds. Easterling Family Law notes that advance planning through prenuptial or shareholder agreements can help establish a clear plan for the business and reduce conflict.

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Categories Divorce Author Lindsey Easterling

What are the key points about a jointly owned business after divorce?

    A jointly owned business after divorce involves several key considerations. It is often treated as marital property, even if one spouse is the primary operator. Continuing to run the business together is rarely realistic, leading to options like restructuring, outsourcing, dissolving, or dividing it. Business valuation is crucial for fair buyouts, and selling the business may be necessary if buyouts aren't feasible. Advance planning through prenuptial or shareholder agreements can significantly reduce conflict and litigation.

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.

Lindsey Easterling
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Author: Lindsey Easterling

Lindsey Easterling is the founder of Easterling Family Law in Charlotte and a family law attorney dedicated to helping families navigate divorce and custody matters with compassion and clarity. Inspired by her own childhood experience with divorce, Lindsey focuses on collaborative, solution-driven approaches that prioritize the well-being of children and families. She is also a certified mediator who helps families communicate productively and reach resolutions that work for their unique situations.

Frequently Asked Questions

1 Is a jointly owned business always considered marital property in a divorce?

A jointly owned business is often treated as marital property in a divorce, even if one spouse is the primary operator or income earner. The specific circumstances determine if the business will be considered marital property.

2 What are the typical options for dividing or managing a jointly owned business after divorce?

After a divorce, continuing to run the business together is rarely realistic. Common solutions include restructuring, outsourcing one spouse's role, dissolving the business, or dividing it. One spouse might buy out the other, or the business may be sold with proceeds split.

3 Why is a professional business valuation important during a divorce?

Business valuation is a key step if one spouse plans to keep the business. A professional valuation determines the fair market value, allowing the other spouse to be bought out fairly. This buyout can occur through cash, other marital assets, or structured payments.

4 How can prenuptial or shareholder agreements impact a business during divorce?

Advance planning through prenuptial or shareholder agreements can significantly reduce conflict. These agreements, created before or during the marriage, establish clear plans for the business in the event of divorce. This can help avoid costly and damaging litigation.