When a couple gets married, they hope to build a beautiful life together. However, the sad fact is more than 50% of the marriages in the United States end up in divorce or separation. In addition, no matter how much you try, getting through a divorce is always a stressful process, especially if there is a business involved in it.
Couples start a business together, hoping for the best and hoping with time it will become a valuable financial asset. However, at the time of divorce, this asset turns out to be the biggest problem for them in many cases.
Often, there are two kinds of situations when a business is involved in a divorce. First, the spouses do not want to share the ownership of the business and want to divide it. Second, they want to separate their personal life but prefer to keep maintain a cordial relationship on the professional front. These are two completely different situations and have their own complexities.
If you’re planning to divorce your spouse and you share a business, then this article is for you.
Yes, of course, we have seen many cases where the couple wants to separate emotionally but maintain their professional relationship as it is. It all depends on whether you can keep your emotions in control or not. Legally, you are provided with three options:
Whether you want to co-own the business for the sake of financial independence or for the health of the business, it’s the best way out. None of the state laws prohibits a divorcing couple from co-owning a business. There are two benefits if you plan to keep your business undivided. First, you get to keep the business as it is. Besides, it prevents the harassment of employees and suppliers in the divorce process.
Another benefit of co-owning the business after a divorce is saving the evaluation cost. If you are planning to divide your business, there has to be an evaluation of the business, which can be very expensive and stressful.
If you are still taking this route, make sure you can maintain a good working relationship with your spouse. This co-ownership can fail if you are not on the same page and can lead you to a legal dispute in the future.
If you are not ready to co-own the business after divorce, the court will treat your business like any other asset and will divide equally providing both the parties with an equal share. The first thing you need to do in this case is to hire a divorce attorney and a business appraiser, who will help evaluate your company’s worth.
If the spouses are not on talking terms and do not trust each other, they will hire a different appraiser each. This will only add to the cost of the divorce, so if possible, try to work with one appraiser to complete the process. If you want to make sure you are not being cheated, your personal divorce attorney can help you.
Once the evaluation is done, you can either buy your spouse’s share in the business or provide them with an asset of equal value. If one spouse is more invested in the business than another then it is pretty clear who will buy out whom.
Even if it’s easier to determine who is buying and who is selling their share in the business, the outcome works differently for both spouses. The one who is buying will have to arrange for funds to purchase the business. In addition, the spouse who is not too invested, and wants to sell will be awarded a lot of money.
In case you do not have enough capital to buy your spouse’s shares, you can agree to pay in installments. For example, if the total share of your spouse cost $200,000, you can agree to pay $100,000 now and the rest $100,000 in the next years. The buyer can also consider offering other assets like the marital house or any other asset of a similar value.
The actual problem arises when both spouses are equally invested and both want to continue owning their share of the business.
If none of the above-mentioned ways works for you, the only option remaining is to sell the business to a third party and equally divide the compensation received. However, there are some difficulties associated with this process. For example, if your business is not that profitable it might take a lot of time to sell it for a significant amount. Besides, the spouse who is invested in the business would never agree to sell it.
If you are still planning to sell the business, you will have to hire a business appraiser. An in-depth evaluation will be performed on your business, depending on which you can set its market price. And, once the business is sold for a good price, you can invest this money into starting a new career. But, if you are unable to sell the business, the situation can be chaotic.
No matter which of the above-mentioned ways you are choosing to go with, make sure, you do these three things:
Whether you are selling the business, co-owning it, or buying the shares of your spouse, it must be put in a written contract. If you co-own the business, make sure the contract reflects paid division and responsibilities. In cases, where one spouse is buying or selling another spouse’s share of the business, there should be a proper mention of the business value and how much is being paid. Do not forget to analyze the future value of the business, before selling your share to your ex-spouse.
No matter how hard it is to face your ex-spouse, you must convey your message clearly. If you have co-owned a business then it’s not just about you two, as there are employees and customers involved in it. So no matter what you decide, stand together for a while and layout clear instructions on how the company will move forward.
None of the above steps should be taken without the help of a professional divorce attorney. Running a business and going through a divorce side by side can be extremely excruciating and you would require all sorts of help possible. Work closely with your divorce attorney as they can determine what’s best for you as well as the company. They can also help you understand the future value of the business and if you’re planning to sell out, a good divorce attorney can help you receive the maximum settlement.
If you want, you can also take a short break from your company or share your responsibilities to focus on the divorce procedure. Take the help of employees, contractors, and staff to handle your task in your absence and focus on what is more important now.
If you own a business with your spouse, we can help you with your case in terms of protecting your interests in the event of a divorce in Washington. We understand the complexities of getting you out of your marriage with as much money as possible and as much of your equity in your business as legally possible. We have a long history of helping people who are in this kind of situation. Call us for a consultation.
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