Divorcing spouses know that virtually every aspect of their lives change in some manner when their marriages end. For many people, their jobs represent some stability during an otherwise change-filled time.
However, business owners may not have that same luxury as they navigate their divorce negotiations.
Divorce with a jointly owned business
When a married couple owns and operates a business today, their divorce may open the door to significant changes for that company. As explained by Forbes, spouses in this situation need to choose between one of three options: sell their business to a third party, continue running their business together or have one spouse buy the business from the other.
When selling to either one spouse or to a third party, spouses will need to agree on the valuation for the business. A purchase by one spouse may be completed via a single payment at the time of the divorce or via a settlement note that outlines multiple payments over time.
Co-operating a business after a divorce requires spouses to clearly delineate responsibilities and identify communication and conflict resolution paths.
Divorce with a solely owned business and a spouse employee
In marriages where one person owns a business and the other spouse works at the business, the rate of pay for the non-owning spouse may factor into negotiations about the business during the divorce. Forbes recommends that employee spouses receive market-rate compensation for the jobs they perform.
How well personal and business expenses are documented and kept separate will also factor into divorce negotiations in these situations and contribute to determining what portion of the business may be separate versus marital property.