What will happen to your shared business in your divorce?

Many married couples in Western New York are also business partners. There’s a reason why we refer to many businesses as “mom and pop” shops. Tastee freezes, diners, hair and nail salons and stores result from this area’s entrepreneurial spirit.

What happens to these businesses when the couple decides to divorce? Can a formerly married couple continue to be partners?

Possible outcomes

New York is an equitable distribution state. The judge won’t divide marital assets 50/50. Instead, they will look at all of the marital property, including the business, and then divide it in a fair and just way.

Before any decision can be made regarding the business’s future and distribution of assets, there must be a valuation to determine the business’s worth, including revenue, profit, assets and liabilities. 

If the business is highly profitable, divorcing spouses sometimes choose to continue operating it together. The joint income stream is preserved, but this approach typically works best if the divorce isn’t contentious. If there is conflict between the ex-spouses, it could spill over and affect business operations. Co-owning a business also requires ongoing collaboration.

If the couple prefers to cut all ties, they may decide to sell the business and divide the proceeds. It provides a clean break and allows both parties to walk away. Another option is for one spouse to keep the business and buy out the other. This will allow the business to remain operational. Still, the buying spouse may need to give up a portion of their share of the marital assets in addition to securing more funds to complete the buyout, if necessary.

Navigating a divorce and deciding the future of a shared business can be complicated. Discussing your situation with a legal professional can help you get your fair share of the marital assets. They may also have helpful suggestions regarding your business.