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Divorce and Dividing a Business

In many marriages, spouses have run a business together. The family-owned business constitutes a marital asset. It probably constitutes a large, if not one of the largest marital assets. It would not be practical to require the parties to run the business together. Typically, one party would continue to business and the interest of the other party is bought out. The business would be appraised and that amount is given to the party that was bought out.

For example, if the business was worth $400,000, the husband wanted to keep the business and continuing running it, and the wife had a 50 percent interest in the business, then the wife would be entitled to $200,000. She may receive this money over time in the form of payments or she may receive it in the form of other property. Parties or the courts can determine the best and most equitable way for the party to receive the money owed to it.

If only one party worked in the business that does not mean that the non-working party is not entitled to receive anything. Further, the non-working party's contributions may be compensable as well. Perhaps one party did the books while the other worked in the store.

Issues to Consider When Dealing with Dividing a Business

There are numerous issues that should be considered when dividing a business. Those issues include:

Valuation of the business.

Who will run the business after it is divided.

Obtaining information about the business, especially if you were not involved in running the business.

Structuring a buy out agreement.

Tax issues and ramifications of dividing the business.

Whether the business constituted marital or separate property.

Check for hidden assets, especially in a cash business.

In some cases, if the party who is running the business is acting in bad faith or hiding assets, the other spouse can ask the Court to appoint a “receiver.” The business and all of its assets are placed into a “receivership” and the receiver has the power to run the business for the benefit of both spouses until a final division is made.

Dealing with the division of a business can be very complex as a plethora of issues come into play. Parties may need to consult professionals, such as an appraiser, an accountant, and an attorney to assist in dividing a family-owned business in a divorce action.

 
 

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