When you own and work in a family business along with your spouse, it can significantly complicate your separation. What happens to the family business when you eventually decide to split?
Is the business marital or separate property?
The first issue is to determine whether the business is marital or separate property. Even if you started the business before marriage, a spouse’s contributions (labor, expertise, financial investment) and using marital assets for the business could mean they have a stake in the company. It’s very important to seek legal advice in order to protect your interests.
Valuing the business
The next challenge is to value the business. This typically involves a third-party expert who will comb through financial records and other relevant information to determine how much it’s worth. Even if the business is deemed entirely separate property, it’s still important to know the financial resources available to that spouse: it can affect property division, custody and child or spousal support determinations.
How to divide your family business
Finally, you’ll need to decide how to divide the business. One spouse may choose to buy the other out, if you can agree who will retain ownership. This could be in the form of a lump sum payment or trading other marital assets for their share of the company.
If you can’t agree on who should retain ownership of the business, and neither of you are willing or able to buy the other out, you could consider selling the business and splitting the profits.
Finally, if your divorce is amicable and you’re willing to work together, you can keep the company. This can work if you’re willing to draw up a partnership agreement, including provisions for what happens if one of you decides to exit the company in the future.
Deciding how to handle your family business can be difficult, but solutions are available. To learn more about your options, contact the experienced divorce lawyers at Appelhof, Pfeifer & Hart, P.A. in St. Paul, MN today.
