If a marriage ends, spouses must divide marital assets, including businesses acquired and owned during the marriage. While businesses are not easy to divide, several factors help divorcing spouses decide how to go about the property division. For one, when one of the spouses has more investments in the company, not only in the capital but also in time and effort managing the business, they are likely to consider buying the other spouse’s business interests.
Factors to consider
Like all other parts of the property division process, buying another’s business interests can be complex. There are several factors to consider, such as whether one spouse has enough assets to buy the other out of the company. What if both spouses have an equal amount of investment in the business? Who gets to buy the other one out? These are just some of the factors spouses must consider before pushing through their decision.
Business value and forms of payment
Of course, the value must be set before one spouse can buy the interests of the other. Parties usually consult a business valuation expert to accurately assess the company’s fair economic value. Once there is a price, the buying spouse can pay through any of the following ways:
- Paying all in cash
- Paying with separate property
- Offsetting of other marital property
- Leveraging the business itself
Noncash payments can be in the form of real and personal property, retirement funds, investments and other businesses.
A buyout is only one of the several options for dividing marital businesses in a divorce. Depending on the unique circumstances of each case, parties may choose to continue running the business together as joint partners or completely sell the company and divide the proceeds between each other.