How Is a Couple-owned Business Treated During Divorce?

What’s mine is yours. That is what many spouses believe occurs when they marry. While this is very much the case for many married couples in Texas and elsewhere, some spouses decide to take measures to protect certain assets and properties in the event of a divorce. When a spouse or a couple owns and operates a business as a unit, there is a concern regarding the longevity of the business if a divorce occurs.

How is a couple-owned business treated during a divorce? Owning a small business with a spouse is not unheard of. In fact, of the 22 million-plus small businesses in the U.S., roughly 3 million are owned by couples. This can make for a messy separation when a couple decides to end their relationship through a divorce.

Dealing with an ex-spouse can interfere and complicate the management of a business or even its daily operation. Thus, if it is not possible to still run the business together as civil business partners, divorcing spouses need to consider other options for their business post-divorce. There are three common ways to deal with this property division issue.

First, the couple could do a buyout. This means that one person becomes the sole owner of the business by buying the other’s portion of the business. A buyout is the most common solution, and it can be completed as one bulk buyout or as a payment plan paid over a period of time. The second option is to come to a compromise. This is a riskier option as it means that both parties still run the business as usual. This option means developing defined business roles and expectations, as the divorce cold impact how each party acts in their business role.

The final option is for the divorcing couple to walk away from the business. Divorce is a great time to make a fresh start, and by selling the business, the spouses can start a new venture on their own. It should be noted that this can be difficult, and based on the economy at the time, it could take time to sell a business. Thus, it might require one or both spouses to run the business until it sells.

Running a business can be a complex operation, especially if it is run by spouses going through dissolution. Thus, it is important to understand how to best address this and other property division issues during a divorce.

Source: NerdWallet, “What to Do When Your Ex Is Your Business Partner,” Jackie Zimmermann, June 21, 2017

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