A family business rarely gets built overnight. It takes years of hard work to get it off the ground. However, if you or your spouse decide to part ways, the fate of your family business will be left hanging in the air. Here is what you need to know when facing this challenging situation.
Why is everything on the table in Connecticut
Under Connecticut state law, the property owned by either or both parties at the time of divorce is generally subject to equitable distribution. It usually includes your premarital assets, inheritances, gifts and family business too. Because the state considers such a wide range of property, a strategic approach is often necessary to protect what you have built.
Your three paths forward
Fortunately, you and your spouse may be able to work together to decide the fate of the family business. Typically, you have three primary options:
- Continued co-ownership of business: If you wish to keep your professional relationship intact after the divorce, you have the option of continuing to run the business together.
- Buy out of one spouse’s interest: If you feel that running a business together after the divorce could be emotionally taxing, one spouse can look into buying out the other’s share based on an agreed-upon market value.
- Sale and liquidation: If neither partner wishes to run the business, you can choose to sell it to an interested buyer and divide the proceeds between yourselves.
With the right legal counsel, you can look for custom legal pathways that are tailored to tackle your complex business situation.
Factoring in the true value of the business
If you decide not to operate the business together, a common first step is to seek a formal business valuation. Business valuation experts may assess the value of your business by taking different factors into account such as:
- Asset worth vs. liabilities
- The past, present and future business trends
- The market value of the business
Whether you are buying out or selling your share in the business, the estimation you get after the valuation can help you make an informed decision.
Why do you need a legal guide before you jump into it?
An inherent issue with dividing a family business is that it intertwines personal and professional interests. The complexity of the business structure can further complicate things. Hence, if you are expecting a favorable resolution, it is important to seek legal guidance from an experienced family law attorney.
