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Dividing a family business in divorce

| Apr 12, 2021 | Property Division |

In every Michigan divorce, the spouses must disclose all their assets and debts, determine what is marital property and what is separate property, and then divide the marital property according to state law. Generally speaking, the more complex the marital property, the more complicated the property division in divorce. If business assets are part of the marital property, the divorce can be very complicated indeed.

The complications can grow even more difficult when the business is co-owned with other business partners. And when the other partners are family members, the divorce raises tricky issues for the family and the business.

Three options

There are three main options for dealing with a family business in divorce. The first is for one spouse to retain ownership. Depending on the circumstances, this could mean the spouse must buy out the other’s share. In this type of situation, the spouses hire experts to determine the fair market value of the business, and then the parties use this price as a basis for negotiation. This can be a good option when the spouses owned the business together during the marriage, or when one spouse owned or co-owned the business before the marriage.

The next option is for the parties to sell the business and divide the proceeds. This can be a good option in many cases, but it has many drawbacks. The most obvious of these is that they must find a buyer. If they co-own the business with other partners, they must find someone to buy out their shares. This can be particularly tricky when the other partners in the business are relatives.

Finally, the spouses have the option of staying in business together. The advantage of this approach is that it keeps the business stable. The disadvantage, of course, is that it requires the ex-spouses to remain as business partners. Some divorced spouses get along well enough that this does not present an insurmountable problem, but many people would like to put some distance between themselves and an ex.

Business owners who are going through a divorce should thoroughly discuss all the options with an attorney who has experience in family law and business.