Divorce and Business Ownership: Navigating the Legal and Financial Issues When Spouses Own a Business Together

Description

Dividing assets in a divorce can be contentious, but when a business is involved, the stakes are often higher, and the process is definitely longer and more complicated. Whether divorcing couples close the business, one buys the other out, or they sell to a third party, counsel will need to address all the complexities of transferring the interest and protecting against future liabilities or surprises and negotiate payment terms, releases, indemnities, and other matters between the spouses and possibly with third parties, such as secured lenders or franchisors. Counsel must also pay attention to make sure that the transfers are not taxable.

When the parties are focused on their divorce, the business could fail due to a lack of attention. Likewise, if the parties attempt to market the business to third parties, finding a mutually satisfactory buyer may take time. If the parties lack the cash to buy out the other, the business relationship may continue for years. During this time, the business must be managed properly and its value preserved. When conflicts between divorcing spouses jeopardize the business, parties may need to seek temporary orders to protect the asset's value.

The business is a separate legal entity with creditors and employees to consider. When one spouse transfers an ownership interest in a private company in the divorce, the transfer of this ownership stake gives the company (and possibly its creditors) a seat at the table in the divorce.

Listen as this authoritative panel explores practical solutions to the complex legal issues that arise when divorcing spouses are also co-owners of a private business.