By Deborah A. Perkins, Esq.
Do you own your own business? Are you concerned with what will happen to the business during a divorce? Here are some things you should know.
Resolving the issue of a community property business in a divorce raises issues in both family law and business law. As such, it is a good idea to consult both types of attorneys.
The most common resolution of this issue is where one spouse buys the other spouse out of the business, i.e. a lump sum cash payment in exchange for full ownership of the business. In this case, the spouses will need to agree on the value of the business. There are many ways to arrive at a business valuation, but usually a finance professional is hired to provide a valuation.
Another option for resolving this issue is for one spouse to actively run the business and the other spouse to maintain only an ownership interest. The non-managing spouse may have voting rights, but would not be involved in the day-to-day operations. In this case, a valuation is usually not necessary.
Another option, although not often used by divorcing spouses, is for both spouses to continue to own and operate the business together. In this case, a buy-sell agreement with exit strategies should be drafted by a business law attorney. Such an agreement is very helpful in preventing future disputes between the spouses regarding how either spouse can cash out his or her interest at a future date.
Finally, the business could be sold to a third party and the proceeds split between the spouses. A business law attorney would be needed to assist with such a sale.
Regardless of the option you choose with respect to your business upon a martial dissolution, there are a number of factors to consider, each with its own legal consequence. The family law and business law attorneys at Schneiders & Associates, L.L.P. work together to achieve the best result for our business clients pursuing a marital dissolution. Please call for an appointment to discuss your particular situation.