How is a business divided during a divorce?
One of the most complicated assets to divide during a divorce is a business. There are processes in doing so and it is essential to know what these are.
When a married couple decides to divorce, the court must divide all assets and liabilities between them. The division of property is generally based on the laws of the state where the divorce takes place and can be either a community property state or an equitable distribution state. In a community property state, assets acquired during the marriage are considered jointly owned by both parties and must be divided equally. In an equitable distribution state, assets are divided in a manner that the court deems fair and just, which may not be equal.
In the case of a business, the court will consider it an asset and divide it based on the applicable state laws. The value of the business should be determined by hiring a business valuation expert who can determine the fair market value of the business. Whatever the value of the business is on that day that the expert determines what the spouses will divide in the event of a divorce.
Once the value of the business is determined, the parties must decide on the best way to divide it. If one party wants to keep the business, they may offer the other party a lump sum payment or other assets in exchange. If there’s an agreement, the business can be sold and proceeds can be divided between the parties.
If one party decides to keep running the business on their own, it will be allowable however not feasible and it would be best to consult with an attorney to know if this is a viable option.
Another option that can be done is if one party buys out the other’s share of the business. This is often done by having the buying party make payments to the selling party over a period of time.
The final option is to liquidate the assets and divide the proceeds between both parties. This is the last resort when both parties cannot agree on any other solution.
In conclusion, going through a divorce is emotional and tough for both parties. However, even when the business was started by both or just by one of the parties, it is still important to divide the assets equally and to know what is equal by hiring a lawyer that can professionally educate you on the process.