Divorce is always a complex process. When you own a family business, it can become even more complex. Not only are you dealing with the emotional aspects of the divorce, you're also dealing with the financial aspects of it. This is particularly true when you're trying to determine what to do with the business.
Before you jump into the negotiations, it's important that you understand your options. Here are some of the options you have when it comes to dealing with the family business during divorce.
Sell the Business and Split the Proceeds
If you're business doesn't depend on your knowledge and expertise, you may be able to sell the business and split the proceeds. However, if your business flourishes because of your particular skill, your business may not be worth much on the open-market. This is particularly true with home-based businesses related to hand-crafts or individual talents.
Maintain Joint Ownership
If you have our spouse have maintained an amicable relationship during the separation, you may want to maintain joint ownership of the family business. In most cases, however, this is not a viable alternative. Even if your divorce started out amicably, it doesn't necessarily mean that it will continue to be amicable.
One Spouse Keeps the Business
If the family business is making a good profit, you may want to consider a buy-out. With this option, one spouse keeps the business and the other spouse receives a cash buy-out equal to half the actual value of the business. In most cases, the spouse who was the most hands-on will maintain ownership of the business.
When considering this option, it's important that you get the entire agreement in writing. It's also important that you do your own due-diligence when determining the actual value of the business. You should never rely on your spouse to provide you with the accurate valuation.
Jamie McCourt, the former co-owner of the LA Dodgers, learned that the hard way when she divorced her husband. In 2009, Mr. McCourt placed a value of about $300 million. Based on those figures, Jamie McCourt accepted a settlement of $131 million. However, following the divorce, the Dodgers were sold for $2.5 billion. Had she done her own investigation, she would have learned that the settlement offer was far below the actual amount she was entitled to.
If you and your spouse own a business, and you're in the process of a divorce, you owe it to yourself to weigh the options. Before you make any decisions, you should discuss the matter with an attorney like Hurth Sisk & Blakemore LLP.Share