Law Office of Lori Crystal, LLC
There Are Options when It Comes to Divorce and A Family Business
Sometimes a married couple in Colorado with an entrepreneurial spirit and a great idea set out to establish a family business. Over the years, their business may grow and flourish, not only as a source of income but as their most valuable asset. Unfortunately, some couples may find that while their business is a success, their marriage is not, and they are facing a divorce. Therefore, it is important for couples to understand what choices they have when it comes to the family business and divorce.
One of the simplest options would be for both parties to bow out of the business, sell it, and split the proceeds. For property division purposes, Colorado is an “equitable distribution” state. This means that when a divorcing couple’s assets are divided, the aim will be to reach a fair division, even if that doesn’t mean an exact 50/50 split. So, if the couple sells their business, they can divide the proceeds of the sale in a manner that is fair, and they can each walk away with a clean slate.
However, many times one spouse wants to retain the family business. If this is so, and the other spouse is agreeable, the spouse that wants to keep the family business can buy out the other spouse. If this is the case, the business will need to be appraised. After that, one spouse can buy out the other spouse’s share, either for cash or in exchange for other marital assets. However, if it is a cash buy-out, the spouse retaining the business will need to be able to afford to do so, which may be difficult for some who are going through a divorce.
Finally, some couples decide that even though they are divorcing, they can still work together as business partners. This may work out if the couple can still cooperate with one another and trust one another to act in the best interests of the business. It may be unusual, but for some couples going through a divorce, this is an option.
In the end, spouses who own a business together but are going through a divorce will have some important decisions to make when it comes to their enterprise. They will want to act not only in their best interests but also in the business’s best interests. Whatever the couple chooses to do, it is important that they think matters through objectively, so they can make a financially sound decision.