What Are the Options for Dividing Business Interests in a Divorce?

 Posted on January 23, 2023 in Divorce

 By: Attorney Megan Drury

Going through a divorce is one of the most difficult experiences that anyone can endure. There are a variety of issues that will need to be addressed by divorcing spouses, and conflicts can often arise as a couple determines how to handle ownership of their marital property. Dividing assets is rarely easy, but it can become even more complex when one or both spouses own a business. There are several different approaches to splitting up business interests between divorcing spouses, and with the help of an experienced divorce attorney, a spouse can understand their options and make an informed decision about the best way to proceed.

Valuing the Business Interests

The first step in deciding how to divide business interests in a divorce is to determine their value. To do this, spouses may need to hire a professional appraiser who specializes in business valuation. The appraiser will look at everything from total assets and liabilities to cash flow and financial documents such as contracts, customer lists, inventory, etc. This will help them come up with an accurate valuation of business interests. Depending on the size of the business and the complexity of its finances, this process could take anywhere from several weeks to several months. Once the appraisal is complete, spouses can begin discussing division options.

Options for Division of Business Assets

Once the value of the business has been determined, there are three primary methods of dividing it between divorcing spouses: a buyout agreement, the sale of the business, or ongoing co-ownership. With a buyout agreement, one spouse will purchase the other’s interest in the business. This means that one spouse will pay the other spouse an agreed-upon sum of money or make other arrangements that will allow for sole ownership of the business.

With ongoing co-ownership, each spouse will keep a share of the business, and they will agree on a “management split” that will detail their individual responsibilities within the company. This allows both spouses to remain involved in running the company, earn income through the business, and share any profits earned. Each spouse will maintain a separate ownership stake in the business, and they may establish options that would allow one party to buy out the other party's stake in the future.

If continued ownership of the business will not work for either party, then selling the business may be the best option. In these cases, a couple may research the market value of the business by comparing it to other similar companies that were recently sold. After selling the business to a new owner for a fair price, the couple can determine how to divide the profits earned along with other marital assets.

Contact Our Milwaukee, WI Marital Asset Division Lawyers

Divorcing couples have many options when it comes to dividing business interests as part of a divorce settlement agreement. It is important for each party to understand these various options before making any decisions about how assets will be divided. Ultimately, the choice of how to proceed will depend on a person's individual circumstances and preferences. Consulting with experienced professionals throughout this process can help ensure that a couple can reach a fair outcome to their divorce. At Gimbel, Reilly, Guerin & Brown, LLP, LLP, our Milwaukee property division attorneys can assist with business valuation, business asset division, and other divorce-related issues. To set up a free consultation, contact our office at 414-271-1440.

Sources:

https://docs.legis.wisconsin.gov/statutes/statutes/767/vii/61

https://www.nfib.com/content/resources/legal/a-small-business-owners-guide-to-divorce/

https://www.americanbar.org/groups/real_property_trust_estate/publications/probate-property-magazine/2019/march-april/three-options-a-private-business-a-divorce/