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Can your family business survive divorce?

On Behalf of | Jul 8, 2024 | Divorce

If you run a family business, you may be concerned about its future in the event of a divorce. Will you have to close shop or let go of something you hold dear? Well, not quite. While it depends on your situation, the end of your marriage does not necessarily mean the end of your business.

A family business can endure and even thrive despite the challenges of divorce, but only with careful planning and strategic action. The first thing you need to do is understand whether the family business is subject to division. Your spouse may have a stake in the family business if:

  • They contributed directly or indirectly to supporting or running the business
  • The business was established during the marriage 
  • The business increased in value if it was started before the marriage
  • Marital assets were used to fund or grow it

If either scenario applies, an accurate valuation of the business can help during negotiations to determine each spouse’s share.

Understand your options

Once each spouse’s stake in the business is established, you can explore several options to handle the business. For instance, you can buy out your spouse and take over total control. Alternatively, you can continue to co-own and run the business together, although it requires an amicable relationship and clear agreements on each party’s roles and responsibilities.

You could also agree on a structured settlement where one spouse receives a larger share of other marital assets in exchange for their stake in the business.

Take proactive steps

A prenuptial or postnuptial agreement can be an effective way to legally safeguard a family business by outlining how it will be handled in case of divorce. This can minimize unnecessary conflict and ensure a smooth transition.

If it’s too late for that or if such an agreement is not feasible, seeking legal guidance can help you navigate the complexities of divorce, protect your rights and secure your business interests.

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