What happens to a family business during and after divorce?
Mary Ann R. Burmester’s Answer
The easiest and least expensive way to address this issue is for the spouses to agree on who will keep the business and to give the other spouse property of comparable value. However, if both spouses want to keep the business and force the other spouse out, then the judge has to decide which spouse is better able to continue to run the business in a way to maximize the benefit to the entire post-divorce family – in other words, generate the most income for child and/or spousal support and provide a legacy for the children. If it isn’t clear that one spouse is better able to run the company than the other, the judge has the power to order the business sold and net proceeds allocated between the spouses. This is usually the least desirable outcome because now neither spouse has a job.
If you both want to keep the business and you agree to continue to run it together post-divorce, you can do this. The law does not require only one of you to keep it. A good operating agreement and buy-sell agreement will be essential to avoid future problems in how the business is run, what happens if one or both of you remarries, dies, or becomes disabled.