Divorce and the Family Business

In any case involving a significant marital estate, the issue of asset division can become incredibly complicated. Some types of assets generate more controversy than others. For example, allocating real estate is much more complicated than allocating fungible assets like cash or stocks. However, distributing a family business is among the most complex tasks divorcing parties and their attorneys can face.

The difficulties of allocating a family business during divorce are caused by uncertainty regarding value, the fact that it is usually impractical and financially unadvisable to distribute business assets in kind, and the fact that a business must continue to be actively managed throughout the divorce process. As a result, divorcing spouses often have a limited number of options to pursue:

  • Divorcing parties can continue to manage a family business as partners. However, this is impossible more often than not because of the emotional nature of divorce.
  • The parties can sell off the assets of the business and divide the proceeds. However, because a business is often worth more than the sum of its parts, this can have the effect of destroying value.
  • One of the divorcing spouses can assume the entire business, with the other spouse receiving an increased share of other marital assets to compensate. This, however, tends to raise disputes over business valuation.
  • The spouses can sell their entire interest in the business to a third party and then allocate the cash proceeds between themselves. But finding a buyer can take time — and prolong a divorce.

All of the above are viable options under certain circumstances. However, divorcing business owners should discuss their goals, expectations and concerns with an experienced divorce attorney to determine which course of action would be most beneficial. At Flaherty Legal Group, Attorney James Flaherty, Attorney Sandi Girolamo or Attorney Pamela Magnano utilize the experience of business and property valuation experts and work to protect your interests in the family business and other financial assets during your divorce.

 

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