Buying out or splitting up when business partners divorce

This article looks at what options spouses who are joint business owners have during a divorce.

For many couples, there is not much of a dividing line between their marriage and their business. As CBS News points out, approximately 3.7 million businesses across the country are jointly owned by husband and wife teams. Unfortunately, with about half of all marriages ending in divorce, that means many of those joint business owners could face some difficult questions about what to do with their business. Below is a look at what the main options are for those getting divorced who are also joint business owners.

The buyout option

Perhaps the most straightforward option is for one spouse to simply buyout the other spouse from the business. This option makes a lot of sense if one spouse's duties can be easily outsourced. For example, if one spouse does the bookkeeping for the business, then it should be fairly easy to hire a professional to take over those duties.

However, complications can arise during the buyout process, especially if there is no shareholder agreement or prenuptial agreement that provides direction about what should happen to the business in the event of a divorce. Disagreements most commonly surround how much the business is worth. Each spouse may have very different ideas of how the business should be valued, which can hold up the buyout process and even affect the performance of the business.

Splitting up or staying together

In some cases, buying out the other spouse may not be an option. For one, as MarketWatch points out, it may be difficult to raise the capital necessary. Also, in cases where each spouse is integral to the business, then a buyout may not make sense. For example, if the spouses run a dentistry clinic and both spouses work as dentists, then splitting up the business may be the most sensible path forward.

Finally, one option that may not sound too palatable to many couples but which could make sense for some is to simply stay together as business partners. Obviously, this option contains many risks, especially since it will be difficult to keep the conflict of the former marriage from affecting the business. However, this could be a temporary solution until one spouse can raise the capital to buy out the other spouse or until a more permanent solution can be found.

Family law help

Divorce is rarely easy or straightforward, especially when a business may be involved in the negotiations. Anybody considering a divorce should talk to an attorney as soon as possible to get a better understanding of what options are on the table and how to negotiate a settlement that best protects them in their post-divorce lives.