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Handling the family business during a divorce

We've previously talked about how property is divided during a divorce, namely the concept of "equitable distribution," and what that means for both spouses. Some types of property are much easier to divvy up than others, though. Selling the marital home and dividing the proceeds, for example, is a relatively straightforward process. The same isn't necessarily true when a family business is involved.

Even if both parties want to walk away from the business, it still must be properly valued using one of several possible business valuation methods before its worth can be properly assessed, it can be sold or dissolved, and then a percentage be assigned to each spouse. 

The percentage each is awarded might depend on a number of factors, including:

  • Whether the business was started during the marriage or by one spouse solely prior to the union
  • The extent to which each spouse contributed to the success of the business (including labor/hours spent at the business, running the household so the other spouse could work at the business, one spouse getting a degree to increase his or her value to the business, etc.)
  • If the business was started prior to the marriage, the extent to which its value appreciated during the marriage
  • The balance of other assets given to each spouse in the divorce property settlement

Keeping the family business afloat after divorce

Of course, if one or both spouses want to keep a family business intact, then other issues remain. Yes, the business must still be properly valued, and each spouses' interest in the business must be assessed, but other questions become relevant in that case as well. These include:

  • What impact will the divorce have upon the business itself?
  • If the spouses co-own the business, will that arrangement continue following the divorce?
  • Will the divorce cause a loss of customer goodwill or a dip in sales because of a change in focus or marketing strategy?
  • Will employees follow one spouse out of the business if he or she leaves?

Is it necessary to buy one spouse out of the business with business funds or by selling stock, or can he or she be compensated for the business interests in another way (i.e., getting to keep the marital home or a vacation property in exchange for a release of interest in the business)?

Nothing in this post is meant to scare you off from divorce just because you have a family business you want to protect. Just keep in mind that things are more complicated when businesses are involved, and that the assistance of an attorney well-versed in handling divorce issues relating to small businesses or professional practices can be invaluable in this situation.

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Frank Family Law Practice
815 Orienta Avenue
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Altamonte Springs, FL 32701

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