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Divorce and Dividing a BusinessReturn to Newsletter Home
Dividing the Family 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.
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.
Copyright 2007 LexisNexis, a division of Reed Elsevier Inc.
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