The complexity of dividing a family business in a divorce
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The complexity of dividing a family business in a divorce

| Apr 2, 2021 | divorce

Property division is a time-consuming, though necessary step in any divorce proceeding. In order for a couple to divide their property, the parties need to first identify all their assets and debts. This involves determining whether the property was acquired prior to or during the marriage. Generally, property acquired during the marriage will be considered marital property subject to division, though there are some exceptions.

Once the property is identified and valued, it can be divided. There are several methods for dividing property, though most states, including Pennsylvania, apply the equitable distribution method.

Equitable distribution seeks to divide the property in the fairest way possible. The court will consider a number of factors including but not limited to: the length of the marriage, each spouse’s current income and ability to earn, and the contributions that each spouse made during the marriage.

Dealing with the Division of a Private Business

While some marital assets, such as bank accounts, are easily divisible, dividing a private business often proves to be more challenging. This is due in part to the fact that there are multiple approaches to determining the value of a business. If the spouses cannot agree about the value of the business, they might need to hire their own experts to determine the fair market value of the business.

After determining its value, the next step is to decide what to do with the business. One option is for a spouse to buy out the other. A common problem with this option is that a buyout will require a sufficient amount of cash or liquid assets, which simply might not be readily available.

Alternatively, the parties could agree to sell the business and split the proceeds, though this comes with its own set of challenges. The parties will have to consider both the marketability and profitability of the business, as well as economic conditions. They will also have to consider how to manage the business until it is sold.

Lastly, the parties might consider remaining co-owners. If the parties feel uncertain of their ability to maintain a professional relationship after the divorce, they can opt for an arrangement where one spouse manages the business and the other just collects their percentage of the profits.

Ultimately, due to the complexity of dividing up a private family business in a divorce, those with questions may want to work with an experienced divorce attorney to better understand the intricacies of the divorce process.