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Property distribution options for small business owners facing divorce

On Behalf of | Oct 13, 2023 | Property Distribution

Property distribution and settlement pose challenges in any divorce, but owning a small business creates a new set of concerns. There are several steps to the divorce distribution process for your small business that you should consider.

How much is your business worth?

Before you can determine the settlement of the business, you need to know its value. The most accurate and comprehensive means for this is a professional business valuation. Valuation considers many things, including the assets, revenues and projections, to assign a value to the organization.

Who retains the business?

If both parties wish to retain equal interest in the business, this provides the simplest solution, however, for many divorcing couples, this does not make sense. If you or your spouse wish to divest your interest in the business, the court will typically divide the value of the business equally.

How can you compensate for a business buy-out?

Your divorce may provide a few avenues for settling the business interest. For example, one spouse might want the marital home in exchange for their interest in the business. Alternatively, the retaining spouse can offer a direct buyout of the other party’s financial interest based on the business valuation.

If you reach an agreement on the business distribution, you will need an attorney to draft clear ownership documentation along with paperwork for the other spouse to forfeit their interest. This provides the record-keeping necessary for the retaining spouse to protect the company.