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The challenges of dividing a family business in a divorce

On Behalf of | Jan 20, 2025 | Property Division

Dividing a business during divorce is more than just splitting the financial assets. It also involves emotional ties and practical decisions, which contribute to the complexity of the process.

Whether you own a small family venture or a larger enterprise, here are some challenges you’re likely to encounter when dividing a family business.

Valuing the business

A major point of contention when splitting a business during divorce is determining its value. Traditional financial statements alone may not paint the whole picture. This is because they do not account for intangible assets like brand reputation, customer loyalty and knowledge, which are key to the business’s success.

Bringing in a forensic accountant or financial expert can help provide an objective valuation, but there may still be disagreements.

Deciding who gets what

Establishing each spouse’s stake in the business can also be a delicate issue. For instance, one spouse may have been responsible for day-to-day operations while the other handled marketing, finances or administrative tasks. 

Similarly, one spouse might have been more involved in directly running the business. The other may have contributed in less tangible ways, such as taking care of the family or managing household responsibilities. This imbalance in contributions can create ownership disputes, potentially leading to delays.

Protecting the future of the business

The end of your marriage does not have to be the end of the business. You can continue to run the business together as co-owners if neither of you is able or willing to buy the other out. However, if that’s not viable, selling the business and splitting the proceeds may be the only solution.

Emotional factors

Family businesses often hold sentimental value, and the stress of divorce can amplify these feelings. As such, it’s essential to approach the process with a clear mind to avoid irrational decisions solely guided by emotions.

Seeking early legal guidance can help you navigate these and other divorce complexities, understand your options and protect your financial interests through the entire process.

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