Owning a family business may be part of the "American Dream," but you can't go through life wearing rose-colored glasses. Some people in California who are married and own a business together might have success in both ventures, at least for a while. However, eventually, their marriage might deteriorate to the point where they feel they are best off divorcing. What does that mean, though, for the business they have built together from the ground up?
One option is to keep on as business partners. Of course, if the couple's relationship is very toxic, this won't work. But, some couples find that although their marriage didn't work out, they can still cooperate together as business partners. By co-owning the business, neither spouse needs to relinquish their interest in the enterprise, nor will they need to go through the expense of having the business valuated.
Of course, many couples who own a business together and divorce find that their relationship can no longer go on both on a personal and professional level. When this happens, one spouse might choose to buy out the other spouse's share in the business. To accomplish this, the business will need to be appraised, the cost of which can be divided between the spouses. Then, one spouse can buy out the other spouse's share in the business. This might work out if one spouse wants to continue owning and operating the business, and the other spouse simply wants out.
Finally, spouses might decide that they want to sell the business outright when they divorce. This way, neither spouse retains ownership of the business, and they can split the proceeds from the sale. If a couple chooses to do this, the business will need to be appraised. Once sold (hopefully for a good price), each spouse is free to do what they wish with their share of the proceeds -- even starting a new business on their own if they wish.
As this shows, there are options that family business owners have if they decide to divorce. Of course, divorce can be a very emotional time so it can help to have some objective advice. Therefore, a person who co-owns a business with their spouse and is seeking a divorce may want to make sure they consult with an attorney, who can assist them in making decisions moving forward.
Source: Forbes, "How To Handle Divorce In A Family Business," Larry Light, March 7, 2016
