If you and your spouse own a family business in Kentucky, it likely will become a huge factor in your property settlement agreement should the two of you divorce. As you probably know, Kentucky law mandates that you and your spouse divide your marital property, including your business, in a fair and equitable manner when you divorce.
As reported by Forbes, you and your spouse have the following three basic options when it comes to dividing up your business in a divorce:
- Sale and split of proceeds
- Buyout of one spouse’s interest by the other
- Continued joint ownership after the divorce
If both you and your spouse are ready to move on to other things, selling your business and splitting the proceeds probably constitutes your most straightforward option. It likely will, however, require a rather large cash outlay to accomplish it. Why? Because you undoubtedly will need to hire a professional business evaluator to determine the overall value of your business, the amount of your respective interests and a reasonable selling price. In addition, should the commercial real estate market be depressed in your area, it may take you up to a year to sell your business. On the other hand, should you accomplish your sale quickly, both of you will have substantial cash inflows with which to do whatever you please
If one of you wants to retain the business but the other is okay with walking away from it, a buyout likely represents your best option. Again, you may need to hire a professional business evaluator to establish the business’s value and that of the departing spouse. Once determined, the staying spouse generally raises the money to buy out the departing spouse by one of the following:
- Exchanging other marital property for it
- Obtaining investment capital or taking on a new business partner who brings cash into it
- Obtaining a business loan to pay the departing spouse over time with interest
Continued joint ownership
Depending on how well you and your spouse work together and how well each of you can separate your business life from your personal life, you may wish to consider continuing to jointly own and operate your business after your divorce. Should you choose this option, however, you should have your attorney draw up a partnership agreement for the two of you to execute that states exactly which responsibilities each of you will assume. It likewise should contain a buyout provision of some sort should one of you decide to leave in the future.
This is general educational information and not intended to provide legal advice.