Some approaches to dividing a family business during a divorce

On Behalf of | Oct 19, 2020 | Family Law |

Colorado has no shortage of entrepreneurs, and divorcing couples who started a business together often need to consider how to divide it. Under the state’s equitable distribution laws, two spouses may negotiate a plan to split their business fairly. 

Assets acquired in marriage require each spouse to receive his or her fair share during a divorce in Colorado. As noted by Reader’s Digest, factors that may affect a fair division include the health and age of the two spouses. If one spouse can no longer run the business or wishes to retire, a divorce may provide an option for an exit strategy. 

Taking full ownership of a jointly owned business

If one spouse can operate a family business on his or her own, a divorce could offer an opportunity to buy out the other spouse. The court generally views a jointly owned business like a partnership. This typically requires purchasing the company for its appraised value. 

As noted by Forbes magazine, a nontaxable spouse buyout may occur when transferring property during a divorce. A couple might decide to negotiate a payment arrangement as part of their divorce settlement. Depending on a business’s structure, a company may also have an option to buy back the shares from the departing spouse. 

Selling the business and splitting the profits

A couple may decide that a successful divorce includes moving on from their business. A professional appraisal may prove helpful in determining a business’s fair selling price. 

After attracting a buyer and closing the deal, splitting the profits could provide welcome cash for a new business or single-person lifestyle.