Finding A New Path Forward

Will you have to liquidate the business in your divorce?

On Behalf of | Dec 13, 2023 | Family Law |

Divorce can be a challenging and complex process at every stage. The division of valuable assets, especially a shared business, can be particularly overwhelming.

If you and your spouse are parting ways, one pressing question may be whether you need to liquidate the business you built. There are several key factors to keep in mind when contemplating this decision.

Business valuation

Before delving into the possibility of liquidation, you need to understand the value of the business. A business valuation is a meticulous process that assesses the worth of the company. It takes into account assets, liabilities and future earnings potential. This valuation provides a foundation for the decisions to come.

Retaining ownership

Liquidation is not always the only option. If one spouse has a strong emotional or financial attachment to the business, they may propose to retain ownership. However, this solution requires careful consideration and may involve negotiating fair compensation for the other spouse’s share.

Buyout agreements

In cases where one spouse wishes to continue the business, a buyout agreement can be an option. This agreement outlines the terms of the buyout, including the payment structure and timeline. Ensuring that the buyout is fair and accurately reflects the business’s value is essential for preventing future disputes.

Possible liquidation

Despite efforts to retain the business, liquidation might become unavoidable in certain circumstances. If neither spouse can afford to buy out the other, or if the business is not financially viable in the long run, liquidation may be the most pragmatic solution.

Statistics indicate that there is a high divorce rate of up to 48% among business owners. Entrepreneurs need to anticipate any eventuality that might affect the business, including a divorce that may or may not be on the table yet.