Building a business from the ground up with your spouse can be a highly satisfying endeavor. However, even if a married couple’s business flourishes, their marriage may not, and they may decide it is best to divorce.
In Florida, the family business, like other marital assets, is subject to equitable distribution in the property division process.
Of course, there are steps that can be taken at the start of the business formation process that can address what happens to the business in the event of a divorce. If the business was owned by one spouse prior to the marriage, a prenuptial agreement could state that the business is to remain the separate property of that spouse and the other spouse could waive any future interest he or she may have in the business.
A business can also include a buy-sell agreement, in which shares of the business cannot be transferred, even in the event of a divorce, unless all other business partners or shareholders agree. In addition, a buy-sell agreement could contain provisions that the partners or shareholders have the right to purchase back the interest in the business of a divorcing party.
However, if none of these steps are taken and a couple decides they cannot work together as business partners following their divorce, but one spouse wishes to retain the family business, the spouse keeping the business will have to pay off, the other spouse’s ownership interest in the business. One way to do this is to exchange the business for marital assets of a like value, such as stocks, retirement accounts or real estate. Another option is a property settlement note. This allows a spouse to pay his or her ex a certain amount plus interest over a long period of time.
Deciding how to handle the family business in a divorce can be one of the most complicated property division issues a divorcing couple will face. This is especially true if the business is one of the couple’s most valuable assets. In the end, it is important for both spouses to understand all their options when it comes to equitable distribution and the family business, so they can make informed decisions.