When going through a divorce, dividing marital property is one of the biggest challenges—and it gets even more complicated when you own a business together. Whether you built the business from scratch or inherited it, understanding how to divide it fairly is crucial.
This guide simplifies the process, providing actionable advice and a list of resources to help you navigate this tough time.
What Happens to a Business During Divorce?
If a business is considered marital property (something acquired or built during the marriage), it may need to be divided during the divorce process. How it’s handled depends on factors like:
- Ownership Structure
- Sole Proprietorship: Typically owned by one spouse.
- Partnership/LLC/Corporation: May have legal documents outlining what happens during divorce.
- Valuation of the Business
- A professional valuation determines how much the business is worth. This step is essential to fairly divide assets.
- State Laws
- In community property states, marital property is divided equally.
- In equitable distribution states, the court divides property in a way it deems fair but not necessarily equal.
Options for Dividing a Shared Business
1. Buy Out the Other Spouse
One spouse keeps the business and compensates the other with cash or other assets.
- Pros: The business remains operational.
- Cons: Requires liquidity or loans to pay the other spouse.
2. Sell the Business
Both parties agree to sell the business and split the proceeds.
- Pros: A clean break.
- Cons: Emotional attachment may make this difficult.
3. Co-Ownership Post-Divorce
Some couples choose to co-own the business after the divorce.
- Pros: Avoids selling or buying out the other spouse.
- Cons: Requires excellent communication and trust.
How to Prepare for Dividing the Business
- Gather Documents
Collect financial statements, tax returns, partnership agreements, and more. - Hire Experts
A forensic accountant and business appraiser can ensure transparency and fairness. - Set Realistic Goals
Understand your priorities—whether that’s keeping the business, selling it, or securing a fair settlement.
Resources to Get You Started
Websites
- LegalZoom – Affordable legal advice for divorce and business matters.
- DivorceNet – Guides on marital property division.
- Nolo – Business valuation and legal resources.
Books
- “The Divorce Survival Guide” by Christina McGhee
- A practical guide to navigating divorce.
- “Divorce and Your Business” by Michael Valenti
- Specific insights for entrepreneurs.
Podcasts
- “Divorce and Beyond” – Real-world advice for divorced individuals.
- “Breaking Free: A Modern Divorce Podcast” – Tips for financial and emotional recovery.
Guides
- SCORE Business Valuation Guide
- IRS Small Business Resources (for tax-related concerns): IRS.gov
Affiliate Services
- Rocket Lawyer – Legal forms and advice.
- FreshBooks – Accounting software to manage finances.
- QuickBooks – Tools for tracking business expenses.
Magazines
- Entrepreneur – Articles on managing a business during tough times.
- Forbes – Guides for entrepreneurs navigating divorce.
