Exclusive Focus In Family Law for Over 10 Years

Divorce presents extra challenges when a couple owns a business

On Behalf of | Feb 4, 2016 | Uncategorized |

It is not uncommon in Colorado for a business to be owned and operated by a husband and wife. However, if the couple gets divorced, they will have to work through some complex property division issues and make some major decisions about the future of the business. Sometimes, divorced couples continue to run their business together after a divorce is finalized, but many, if not most, would find this situation too uncomfortable. For those who feel they can no longer work together, one option is to sell the business and split the proceeds.

If selling the business is not feasible or if one spouse wants to keep running it, the best option is generally for one spouse to buy out the other. This will only work if the spouse who is doing the buying has funds available to do so. To avoid this problem, it is recommended by financial advisors that couples starting a business together buy a life insurance policy that can be cashed out to fund a buyout in the event of divorce.

The issues that arise when business partners divorce can often be minimized if the couple plans for the possibility of divorce at the time they start the business together. For example, some experts suggest that couples going into business together enter into a buy-sell agreement. This is an agreement commonly entered into among partners and shareholders of a business. It typically contains provisions setting the price of a buyout or establishing a process for valuation of the shares or partnership interests.

A jointly owned business adds an additional layer of complexity to any divorce. A spouse who is divorcing his or her business partner should take timely steps to address business valuation and buy out issues. This could help ensure that the business does not suffer because of dissolution..

Source: Wall St. Journal, “How to Keep a Business Alive After a Divorce,” Andrew Blackman, Jan. 24, 2016