What Happens to a Family-Owned Business during Divorce

Divorce in itself is a complex, highly-charged emotional and stressful experience. It can be further complicated when a family business is thrown into the mix. With more than 50% of marriages in the US ending in divorce, and with nearly 90% of businesses being family-owned, the chances that a family business will be part of the property division issue of a divorce is quite high.

There are many issues that will come up with regard to this type of property division, and because of the many legal ramifications, it is important to have competent legal representation overseeing the process. As an article on the website of the Raleigh Law Office of Marshall & Taylor, P.C. states, a divorce lawyer should have a deep understanding of how to protect the client’s rights when it comes to dividing the family business.

The difficulty of dividing the assets of a family business so that is it fair to both spouses depends on many things. Aside from any rancor that the spouses may be feeling towards each other, the business side of the family business will affect the way it will be managed in a divorce. For example, in a single proprietorship or partnership, only the spouses will be affected by the division of assets. In a corporation, there will be other shareholders to consider.

There is also the question of control. If one spouse runs the company without the help the husband or wife, it is more than likely that a buyout will occur. If both spouses are heavily involved in the business, it is possible that they will continue to work in the business after the divorce as no more than partners. The simpler option is for both spouses to agree to sell the business to a third party and divide the proceeds.

According to the website of the business lawyers of Arenson Law Group, PC, a family-owned business, unless otherwise stipulated in the business papers, is community property and will be divided equally to the spouses. The method by which the valuation and division is done will be determined by the circumstances of the divorce itself and the business setup. This is why it’s good to have an understanding of how your business is structured, and why it is important to have a lawyer who is able to understand your business circumstances.

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