Family Business Needs Special Handling in a Divorce
When planning and preparing for a divorce, there are many things to consider. If the couple has children, child custody and child support payments have to be worked out. Then there will be the splitting of assets. For most people, this includes houses, cars, material goods, and cash. But couples who own a business together are also faced with the tricky decision of how to split up the family business. For many, running a business together after a divorce is not a viable option.
According to the US Census Bureau, there are an estimated 3.7 million businesses owned jointly by spouses in the United States. The type of business owned and the role each spouse plays in the business will determine if and how the business will survive the divorce.
There are several options when it comes to splitting up a business. First, it must be determined who wants to keep running the business. Take for instance a medical office in which one spouse is the medical professional and the other spouse handles the clerical work. It would be possible to outsource the clerical work, so the medical professional would likely keep the business. In a case like this, one spouse will typically buy out the other spouse. Buyouts can be tricky, especially getting both sides to agree on how much the business is worth, and how much of that value should be applied to the buyout. If, in another example, a couple owns a medical office and both spouses are medical professionals, the business would likely be split. As a last resort, if no agreement can be reached on who will keep the business, selling outright and splitting the profit is the only option.
Getting a well-drafted prenuptial agreement before getting married can alleviate many of the issues that arise when getting divorced. If the business is started after marriage, the couple may consider a shareholder agreement that spells out the role of each partner. Having these documents can save couples from lengthy court battles that can end up destroying the business that they invested so much time and effort into building.
Read original article here.