Many Colorado couples own a family business. This adds a layer of complexity to their relationship, as they will have to work together not only as romantic and family partners, but also as partners who share a business interest. When such a marriage ends in divorce, determining how to divide the family business can be a challenge. The following are the three most common options.
One approach is to simply move through the divorce and remain working together as business partners. This approach is the least disruptive to the business, as things will largely continue on as per the norm. However, being able to function as business partners during and after a divorce is easier said than done, and this option is best suited for couples who have chosen to pursue a very amicable and collaborative divorce.
Another way to move forward is for one spouse to “buy out” the other’s interest in the business. If there is not sufficient cash or available credit to finance that buyout, another option lies in handing over a blend of other assets to equal the value of half of the business. For example, if a couple’s small business is valued at $200,000, the retaining wife could opt to walk away from half of the couple’s equity in their home as well as a share of her portion of retirement savings in order to give her husband his $100,000 interest in the business.
For many Colorado couples, neither of these options offers a viable solution. In such instances, the only available option is to sell the business and divide the proceeds. Doing so will mark the end of not only the marriage, but also the business that both spouses have worked to create and nurture. However, both parties will also gain an influx of cash, which could be put to use to fund independent post-divorce business ventures.
Source: Forbes, “How To Handle Divorce In A Family Business“, Lora Murphy, March 7, 2016