If you and your spouse own a Florida business and are contemplating divorce, this business likely represents your biggest marital asset. Therefore, determining what to do with it undoubtedly is one of your major concerns.
Basically, you have the following three options:
- Sell the business and divide the proceeds
- One of you buy out the other’s ownership interest
- Continue to own and operate the business jointly
As you might expect, each option has advantages and disadvantages. Determining which option is best for the two of you – and the business itself – will depend on your own particular situation.
The main advantage of selling your business is that it gives both you and your spouse closure and likely provides each of you with a substantial influx of cash to do with as you choose. The main disadvantage is that a business sale usually requires a lengthy procedure, the first step of which is determining your business’s value and its realistic selling price. In all probability, you will need to hire a professional business evaluator who can objectively arrive at these two figures. Unfortunately, such services do not come cheaply. In addition, you have no way to predict how long your business may remain on the market before selling.
If one of you has particular ties to the business, (s)he may wish to buy the other out. The advantage here is that the remaining spouse can continue to run the business (s)he loves while the leaving spouse can walk away with money in his or her pocket. The downside, however, is that you again likely will need to engage the expensive services of a professional business evaluator to determine not only your business’s overall value, but also the value of the leaving spouse’s share. Then the remaining spouse must decide how to pay the leaving spouse. Generally (s)he chooses to do so by means of one of the following:
- (S)he “pays” the leaving spouse by exchanging other marital assets equal to the value of the leaving spouse’s share.
- (S)he acquires a new business partner or a source of investment capital with which to pay the leaving spouse.
- (S)he obtains a business loan, often called a property settlement note, and pays the leaving spouse over an agreed upon length of time with interest.
Continued joint ownership
Depending upon how much marital discord you and your spouse are currently enduring, the idea of continuing to jointly own your business after your divorce may seem ludicrous at best. Nevertheless, many divorced couples successfully operate their businesses together post-divorce. Naturally, both you and your spouse must be able to separate your respective personal and business lives in order for this option to work. It is, however, the best option for your business itself since it can continue normal day-to-day operations without the necessity of downtime due to an impending sale or the arrival of a new partner. In addition, you and your spouse can forego the expense of a professional business valuator.
Experts strongly recommend, however, that if you and your spouse choose this option, you draft and sign a partnership agreement as soon as possible. This agreement should specifically delineate the duties and responsibilities each of you agrees to undertake. It likewise should include a buyout procedure should you decide at some time in the future to part business ways like you parted personal ways.
It goes without saying that divorce is never easy. Dealing with your family business on top of all your other issues adds one more layer of potential stress and strife for both you and your spouse.