Divorcing is rarely simple—but when you and your spouse share a business, it can get especially complicated. You’re not just dividing your personal lives; you’re also unraveling professional and financial ties that may have taken years to build. Here’s what you need to know about handling a divorce when a shared business is involved.
- Determine Whether the Business Is Marital Property
The first step is figuring out whether your business is considered marital property under Pennsylvania law. Generally, if the business was started or grew significantly during the marriage, it’s subject to division—even if only one spouse’s name appears on the paperwork or ownership documents.
If the business existed before the marriage, the court may still consider the increase in its value during the marriage as marital property. This is why accurate records and clear documentation are essential.
- Get a Professional Business Valuation
Once the court (or the spouses) agree that the business is marital property, the next step is to determine its value. This is done through a business valuation conducted by a qualified expert, who will assess the company’s assets, debts, income, and market conditions.
The valuation should account for taxes and other financial factors to determine the after-tax value of the business. This figure will guide the rest of the negotiations or court proceedings.
- Decide How the Business Will Be Divided
There are typically three possible outcomes for dividing a business in divorce:
- Buyout: One spouse buys out the other’s interest using cash, marital assets, or structured payments. This is the most common approach when one party wants to continue running the company.
- Sell and Split: The spouses sell the business and divide the proceeds equitably. This may be appropriate if neither party wants to continue operating it or if the relationship is too strained to maintain joint control during or after the divorce.
- Continue Co-Owning: In very rare cases, divorcing spouses may choose to remain business partners. This requires a high level of trust, clear communication, and strong legal agreements to protect both parties’ interests.
- Put Everything in Writing
Once a decision is made, the division should be clearly documented in the divorce settlement. Depending on the structure of the business, additional legal documents—such as a buy-sell agreement or a revised operating agreement—may also be necessary. These contracts outline how ownership changes will occur, how disputes will be handled, and what happens if one spouse wants to sell their interest in the future.
- Work with Experienced Professionals
Dividing a business is one of the most complex aspects of divorce. It’s important to work with:
- A family law attorney experienced in business division
- A forensic accountant or business valuation expert
- A tax professional to address potential financial consequences
This team approach ensures that your rights are protected and that the business continues to operate smoothly during and after the divorce.
Final Thoughts
When a business is part of your marital estate, divorce becomes both a legal and financial balancing act. The key to achieving a fair outcome—and minimizing disruption to your livelihood—is preparation, transparency, and professional guidance.
If you’re considering divorce and own a business with your spouse, consult with an experienced attorney who understands both family law and business matters to ensure your interests are safeguarded at every step.
If you have any questions about the topic discussed in this article, or any divorce matter, please give us a call at Bononi & Company Greensburg, PA 724-832-2499.