Splitting a business owned by a divorcing couple

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Posted By | February 4, 2020 | Articles

Married couples who started a business together in New Jersey may find it challenging to divide it during a divorce. Some spouses may instead decide to continue running it as partners rather than one individual buying out the other’s ownership stake. 

As reported by Fast Company magazine, two ex-spouses may need to enter into an agreement to set some ground rules regarding how to manage the operation as partners. The new ground rules may cover a revamped ownership structure, outline separate work schedules and provide a revised profit sharing strategy. 

When two individuals have contributed to the growth and profitability of an enterprise, but do not want to work together after a divorce, who keeps the business may become a serious and potentially heated issue. Under the Garden State’s equitable distribution laws, the court determines who takes sole ownership of an asset or property when two spouses cannot decide how to do it on their own. 

Dividing a business based on a judge’s interpretation of fairness may affect the established relationships with a company’s employees, suppliers and service providers. A family court judge does not typically have an awareness of a company’s history or an understanding of its customers. He or she may award ownership to one spouse based upon the amount of property the other spouse receives. When the divorce is final, the spouse who has sole control over a business may discover that running it alone does not generate the same amount of income as it was previously capable of. 

If a couple cannot decide on who will continue managing a business after their marriage dissolves, another option worth considering is to sell it and split the proceeds. As reported by Forbes magazine, finding a suitable buyer may, however, lengthen the divorce process.