In a Divorce, the Family Business Needs Special Handling
Some of the eventualities of divorce are well-known: The family will be splitting, marital property will be divided, child custody and parental visitation plans will be outlined, etc.
One of the things many people don’t fully understand about divorce, though, is what happens with a family business.
This is a major issue, as the U.S. Census estimates there to be 3.7 million businesses owned jointly by a husband and wife in the United States. In many cases, these will be considered community property, which can make transitions tricky. In one case, California resident Kassy Perry was prevented from simply shutting her public relations business down, and was forced to write an $800,000 check to her husband to buy out his portion.
Depending on the role each spouse has in the business, things can often be neatly resolved. For instance, if one spouse is a surgeon and the other is the office manager, the business will usually survive the divorce, as a new office manager can be outsourced. If, on the other hand, a husband and wife doctor couple open an office together, then the business will often have to split, since both partners will be seen as equally integral to the business.
The solution to this problem is a little tricky, as well. Obviously, the best way to prevent any issues is to detail what happens with the family business in a pre-nuptial agreement. Reality is often far from ideal, however, and many people find themselves facing this issue long after a pre-nuptial agreement was on the table. In such situations, it is often best to have the family business valuated, and then have the spouse who wants to keep running the business simply buy the other person out.
Often times, “buyouts” such as that will either be in exchange for other marital assets, or payment plans will be structured over time. In absolute last case scenarios, the business can be sold, and the proceeds split in half, but that is understandably a last resort for most couples.
If you are facing a divorce, are unable to come to an agreement about your family business, or are dealing with any other family law matter, do not hesitate to get in touch with a skilled family law attorney today.