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Dividing a family-owned business in a divorce

On Behalf of | Jun 11, 2021 | Divorce

Determining how marital assets should be divided in a Virginia divorce can be a thorny process when a family-owned business is involved. In these situations, one spouse can buy the other out, the spouses can sell the company and divide the proceeds, or they can keep the business and run it together. Keeping the company may be the simplest solution, but running a business with a former spouse can be difficult even after an amicable divorce. If they settle on a buyout or a sale, the first step they should take is deciding how much the business is worth.

Appraising and selling a business

Independent appraisers are usually called upon to determine the value of a business during a divorce, but even this can be a contentious process. When spouses are unable to agree on a figure, it may be necessary to call in several appraisers. Selling a business also presents challenges as finding a qualified buyer could take several months. This could prolong a stressful situation unbearably for people who are anxious to move on and make a fresh start.


A buyout makes the most sense if only one of the spouses is involved in the day-to-day running of the business and is reluctant to walk away from a venture they spent years building. This also has financial advantages as property transferred during a divorce is not usually subject to tax. However, buyouts that involve purchasing shares should be handled carefully as mistakes could lead to capital gains tax exposure. If the spouse who runs the business does not have the funds for a buyout, they could agree to pay over time by signing a settlement note or make concessions in property division negotiations.

Prenuptial and postnuptial agreements

One way people can avoid these issues is to take care of them in advance by entering into prenuptial or postnuptial agreements. An experienced family law attorney could encourage spouses who are considering this option to negotiate in good faith and reach an agreement that is basically fair. An attorney could also point out that having a prenuptial or postnuptial agreement in place could make a family-owned business appear less risky to prospective financial backers.

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Attorney Harvey S Lutins