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Divorce When a Business is Involved

One important purpose of a divorce proceeding is to iron out all the complications involved in the dissolution of the marriage. This includes dividing the marital property depending on the prevailing property regime, the allocation of parental rights and responsibilities when children are involved, the determination of child custody, among other things. 

Divorce ultimately settles all of these matters and gives both partners whatever they are due from the marriage. Another thing the courts have to take into consideration is if the spouses own a business together. A business adds an extra layer of complication to a divorce as the courts will have to decide how it will be split up, and if one person gains 100% control over it – how is the other partner compensated. 

What you can do with your joint business if you are getting divorced

If a business is involved in a divorce proceeding, there will be what is called a business valuation. The purpose of this is to determine how much the business is worth. Ultimately, it is the decision of the parties that prevail.

You and your ex should discuss who will be taking over the business. If you agree that you will be taking over, then part of the value of the company will go to your spouse and the business will be yours. 

There can also be instances wherein you can both continue managing the business together. There are many cases wherein couples make better business partners than marital partners. If you and your ex decide that you are capable of working together for the purpose of your joint business, this is also a possible set up. 

However, if both parties cannot agree as to who takes over the business after the divorce, the common course of action is to sell the company. The liquidated value will then be divided into two, since the business is considered a marital asset.

Your best course of action

The decision on who will continue managing the business can be easy if you look at it from the perspective of profitability. Is the business profitable, or is it only a passion project or hobby? The profitability of the business will make it easier to decide whether you should let go of it or fight to take over. 

If the business is not that profitable, it’s easy to allow your ex to own the business, while you get the benefit of half its value. If it is profitable and you are also the more valuable asset to the business, i.e. you do all the bookkeeping and operational management, then you can argue your side and aim to gain sole ownership of the business. 

One important thing is to know the value of your business even before the official valuation. This will enable you to negotiate with yourself and determine what’s the best decision you can make regarding the subject matter.

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Danielle
Davis

Partner

Denver – Cherry Creek

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