Should You Stay in Business With Your Former Spouse After a Divorce?

Divorce can be more difficult than the norm if you are divorcing a business partner as well as a spouse.  There are several options you can explore — sell the business and split the profits, have one spouse buy the other spouse out, or continue to operate the business together.  Here are some thoughts on which scenario might be best for you:

Selling the business.

This option is probably most suitable for divorced spouses who cannot find common ground.  If you are divorced because there was a lot of conflict in the marriage, that probably carried over into the business — which is bad for business as well as for your own well being.  Selling the business provides a clean break from having to see each other on a daily basis, and the profits from the sale can provide a nice cushion for each of you to pursue your own paths.

Buyout.

This option works best when one spouse wants to continue in the business and the other one wants to leave.  The business will need to be valued and assets divided appropriately, with a buyout plan that either allows for a one-time payment or payments over time if the spouse being bought out is flexible enough to consider that option. 

Staying in business together.

When a divorce is amicable and the spouses get along fairly well, there is a chance for success when you elect to continue operating your family business together.  There should be an operating agreement that spells out the general rules on how the business will operate, the roles each of you will play, how profits and losses will be apportioned, and guidelines for what will happen if one spouse wants to eventually exit the business.  Don’t forget to address any concerns upfront and honestly with employees, who often pick sides when owners divorce.

Your legal team at Koenig|Dunne is here to provide you with guidance and advice regarding all of the issues that you will face throughout the divorce process.

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