Many American couples start a business together. In fact, an estimated 3 million small businesses in the U.S. in 2000 were couple-owned, and that number has likely grown over the last nearly two decades. When a couple have become business partners and dissolve their marriage, the process can be disruptive – and even detrimental – to the business.
It’s untrue that getting a divorce automatically means you and your soon-to-be-ex must liquidate the business you two share. There are, however, multiple complexities to overcome to find a new routine for keeping the company afloat.
A long list of assets called marital property is often divided during a divorce, and the company you and your spouse own is considered one of those assets. Determining how the business will be divided depends on several factors, including:
- Financial agreements on loans and loan refinancing
- How the business was funded
- Where the profits went
- Whether you started the business before or after you got married
Do You Want to Close Your Business or Keep It?
Emotions can run high when a divorcing couple is deciding whether to work out a plan to keep the business going and equitably divide it or to liquidate the company assets. A major factor to consider is the actual economic value of the business and your share. The valuation of a business is a complex procedure that requires an expert opinion. To ensure clients make the most informed decision possible, Petrelli Previtera Schimmel consults with certified public accountants (CPAs). When you can quantify the value of the business, it may become clear whether it makes more sense to keep it or get rid of it.
If neither spouse wants to keep the business, selling the company and dividing the profits may be a viable option.
Keeping the Business: Divide or Trade?
If you and your spouse decide to keep the business running (or can’t agree to close it), the court will determine the percentage of the company’s value that should fairly go to each spouse. The size of your share and your spouse’s share depend on the relative contributions each of you made to the business.
For example, you may be awarded a much larger share of the company if you can prove your spouse had little to do with the running or profitability of the company. Alternatively, you could agree to let one spouse keep the entire share of the business and “trade” for another asset of equal value to your share.
If you own a business with your spouse and the two of you are talking about divorce, there’s more on the line than your marriage. Making the right decision regarding your company’s future can affect your both in a big way financially.
The legal team at Petrelli Previtera Schimmel has helped numerous couples decide what is best for their business as they dissolve their marriage. Feel free to contact our firm for assistance as you consider the implications of your divorce not only on your business, but also on your family, property and finances.