Keeping the Family Business Safe From Divorce Proceedings

By Sheryl Rentz on April 18, 2022

Divorce is a complicated process. Not only do you have child custody and support matters to settle, but also division of marital assets. When a family business is involved, the process can become even more complex.

What Are Your Options for the Family Business in a Divorce?

If you co-own a business with your soon-to-be-ex-spouse, it can make divorce even more difficult. Consider the following options on how to proceed:

Continue Co-Owning the Business Together

This may be a solution if the spouses can get along during and after the divorce. The advantages are:

• There is no need for a valuation of the business so it can be divided as an asset in the divorce.
• Both spouses are able to keep their interest in the business.

Of course, keeping the business together will require continued close contact with your former spouse after the divorce is final. You will need to maintain a good working relationship as partners for the business to succeed. If this is not likely to happen, you would be better off going with another option.

Sell the Business and Divide the Profits

This may be the best way to prevent potential issues regarding the business from arising in the future. The business is sold to a third party, and the profits from the sale are divided between the spouses. You may want to have an appraiser do a valuation of the business to determine the right selling price. However, if the business is successful and likely to produce substantial profits in the future, you may not wish to sell it.

One Spouse Buys Out the Other

In a Pennsylvania divorce, a business is considered marital property to be divided among the spouses. If you and your spouse do not want to continue working together, a good solution may be for one to buy the other out. You will need a valuation performed by an appraiser to determine what each half of the business is worth. The spouse who is keeping the business can pay the other for his or her half, or other marital assets can be exchanged.

One Spouse Sells to a Third Party

If one spouse wants to keep the family business and the other wants out after a divorce, a solution may be for the departing spouse to sell his or her half interest in the business to a third party. In this way, the business may be divided among the spouses without either having to buy the other out or exchanging other marital assets. Transfer of business interests may be affected by an existing partnership or other business agreement.

How Do You Decide What to Do with the Family Business in a Divorce?

What you do with the family business can depend on a number of factors, including:

• How well divorcing spouses get along with each other
• How profitable the business is likely to be in the future
• Whether one spouse can afford to buy the other out
• If other assets of equal value can be leveraged in exchange
• Whether a partnership with a third party in lieu of a spouse is a viable option

Division of assets in a divorce can be complicated, particularly when a family business is involved. Consult with an experienced Montgomery County divorce attorney for sound legal counsel on how to proceed.

At the Law Offices of Sheryl R. Rentz, P.C., we have extensive experience assisting clients with equitable property distribution in a divorce. We are well-versed in business valuations and can help ensure your share of the marital assets are well protected. Contact us at (610) 645-0100 to schedule a free consultation.