WE OWN A BUSINESS – HOW DO WE DIVIDE THAT?
How do we divide property during divorce?
Division of property in a divorce can feel like a monumental task, but we have this well in hand. The process of splitting assets, property, and liabilities is called Equitable Distribution, or Property Division. Obviously some items lend themselves to an easier division than others. Businesses for instance can be very complicated, and require additional work to divide properly.
Can we split a business?
Yes, you can split a business, and White Oak Legal would love to assist you in this process.
Vehicles, houses, bank accounts, etc. may not seem too difficult to separate, but a business is a whole other ball game. What makes it complicated is there is no easy way to establish a value for a business. Details such as cash flow, profits, and owner goodwill all matter, and have to be taken into consideration as we establish a value for the business.
How do we divide the business?
There are 3 ways to accomplish a split of your business during divorce. The three methods at a buyout, continued co-ownership, or liquidation of the company and division of the profit.
1. The most common way to divide a business in divorce is a Buyout. Buyout simply means one spouse buys the other’s interest in the company. If the buyer has enough available cash to purchase the seller’s half outright, they will usually choose this quick and easy route. However, if he or she does not have the total amount necessary, other assets may be utilized. IRAs, 401Ks, or equity in other property are just three options. You must give careful attention to any tax ramifications though.
Another option would be a Structured Buyout. All this means is that the buyer and seller agree to installment payments over a period of time. A buyout of this type is usually secured by liens or other security instruments to guarantee payment of the total amount due.
2. Another method is Continued Co-Ownership, but this requires two people willing to continue to work together harmoniously. While this sounds like a wonderful option, few individuals find they can work this closely together after a divorce. The first way to co-own a business requires sharing the daily operations. Another option allows one partner to take a more backseat approach while the other runs day-to-day operations. In both instances you would divide the profits in an agreed upon way.
3. Last, you and your spouse could agree to Sell the Business, but most of the time one spouse wants to keep the business instead of selling it. Other issues that may arise with this choice include incorrect timing, or need for a specialized buyer. The economy has more ups and downs than a roller coaster, so selling a business may not be ideal at the time of your divorce. Also, if you co-own a unique business, you may have trouble finding a buyer. If either of these scenarios fits your situation, you may want to consider co-ownership or a buyout.
Which method is best for us?
As you can read, there are several ways to divide a business, and each method of Business Division has its pluses and minuses. White Oak Legal will guide you through the process, and help you make an informed decision. The first step is to get started! Schedule a consultation online today, or give us a call. The sooner we begin the more options we’ll have available, and the faster we’ll finish.