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The Business Divorce

Many couples own and operate a business together. This can be sticky when they decides to separate or divorce. At the beginning, there are more questions than answers; “Who keeps the business?” “Do I have to buy out my soon-to-be former partner?” “Do things stay the same?” “My partner said they invested more money into it, therefor it belongs to them, even though I put more work hours into it,” plus much more.

So, what to do?

A family business is an asset – and is subject to equalization – which means the increase in the value of the business from the date of marriage to the date of separation is to be divided equally between spouses.  

If the family business is jointly owned by spouses, each spouse is entitled to continue to benefit from and operate the business after separation until the business is transferred to one party, sold to a third party, or wound up or butterflied (meaning dividing the business into two or more different businesses).

The same rules apply to married business owners as arms-length business owners. For example, one spouse cannot lock the other out of the business or take the clientele to a new business (this could be a case of oppression, meaning you would have a legal recourse).

Dealing with a family business during a divorce or separation will involve family lawyers, corporate lawyers and probably accountants and valuators, to ensure there is a fair division of assets and a proper legal winding.

Throughout my 15 years as a Family Law lawyer, I have mostly seen it all, ranging from former couples agreeing that it would be easier to just keep things as they are and they share in the workload and profits, to couples bankrupting their business while trying to determine who is entitled to what.

Often, over time, some form of middle ground is reached. There is no “best way” to divide up a business, because each situation and divorce or separation is unique, along with the business.

At Berry Family Law, our team will research your business, its history, expenses, income and assets and develop a strong strategy. The best advice I give new clients with this issue is that you should mentally prepare yourself for some sort of compromise. Typically, at the beginning of the divorce or separation process, many people have an “all-or-nothing” approach and that mentality usually leaves the client worse off with the business than where they began.

Our firm crafts realistic plans, options and solutions to these situations and we have the experience to help you navigate this legal minefield that will provide find the best outcome for you and your loved ones.

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