How to divide a shared business in a divorce

On Behalf of | Mar 30, 2020 | Divorce

For business owners in Minnesota, getting a divorce means that they will have to determine whether they will divide the venture or keep working together. The latter may be necessary even if one hopes to eventually buy out the other. The person who wants to continue owning the business may lack sufficient liquidity to buy out the other spouse.

When buying out the other person is possible, it may also be a good idea to make sure the person is not held responsible if there are any claims against the business. The entire transfer of ownership should be thorough and should sever all financial ties.

In cases where ownership must continue but one spouse hopes to buy out the other in the future, a put/call option specifies a certain time when the person can exercise that buying option. Usually, the one who will eventually own the company continues as operator, but the other person should have certain veto rights. This helps ensure that there are not fundamental changes to the company without the permission of the non-operator owner.

Sometimes, both people may want to continue owning the business because they enjoy the work or because it is profitable or is likely to be profitable in the future. In this situation, they may want a buy-sell agreement.

Another option for couples who own a business could be to sell the company and split the proceeds. However, they might not be able to sell it immediately, and if this is the case, they may need to decide how they will continue running it until that time. There may also be situations in which one party owns and runs the business but the other one is still owed part of its value as part of the overall division of property.