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Can my family-run business survive a divorce?

Family run business leading to divorce

Divorce can be a tricky business — even more so when the couple that is divorcing work together in a family owned and operated business.

Divorce is rarely a quick and simple process. That’s where a family lawyer will be able to help negotiate through any situations that arise from unravelling each party’s dependence on one another in a fair way. Resolving what to do with a family-run business adds another layer of complexity on top of everything else.

A fair split

In a divorce, the family business will be treated as an asset. As with other assets, it isn’t always so easy to find the best way to divide it equally.

Even if the business has multiple locations, it may not be practical to simply give each party an equal number of locations, since locations may not have equal value and since this may set up a situation where they will compete against one another for business in the future.

Establishing ownership and value

An important factor is who owns the business. Where ownership is with one spouse than the other is only entitled to share in the value. If both parties own the business jointly than if a mutually acceptable agreement cannot be reached as to the co-management of the business, or the sale of one party’s interest to the other than the business may have to be sold to a third party.

Ultimately, it will be necessary to get a fair valuation of the business. An independent party may be called in to determine the value of the business as a baseline before any other financial actions are taken.

Is it time to sell?

If both parties agree to it, the business may be sold and the value distributed equally to both parties.

However, in the majority of cases, it is preferable to avoid selling the business. A spouse who is more involved in the business, for example, may want to maintain ownership and be willing to give up more of their stake in other assets, such as the matrimonial home or retirement savings for example, in return.

Alternatively, the spouse who is awarded the business may be required to pay a portion of the value of the business to their partner to make the trade fair in a lump-sum or over a period of time.

Making the most of a tricky situation

If you, or someone you know, is headed towards divorce with lots of questions about what is going to happen with the family business, the first step is to get in touch with a local lawyer. Since there are so many different types of businesses and business structures, it’s necessary to take a close look at the specifics before jumping to any conclusions.

Feel free to reach out to Epstein & Associates to set up a quick consultation where you can get a sense for the legal advice and reassurance that our team can provide to help you through a complicated legal situation. We have lawyers who focus on family law and also practice corporate law who can advise you.