Running a business with family can make it easier to juggle work and familial responsibilities, and parents may wish to pass such businesses to their children. However, divorcing a spouse with whom you operate a family business can be challenging. Residents of Arizona should keep some things in mind about how to handle their business during a divorce.
Prenuptial agreements are contracts executed by couples before they marry that govern a variety of issues, including how assets will be distributed upon divorce. Spouses who operate a business should seriously consider prenuptial or postnuptial agreements. A contract can set expectations around the family business after a divorce and reduce the time and expense associated with litigating matters related to a family business.
Transfer and payments
One common solution to dividing a business upon divorce is for one spouse to completely take over the business and make payments to the other spouse to buy their share. This avoids conflicts that may arise if both spouses are still involved in the business. However, spouses need to make sure they can review all financial documents related to the business and ensure they are receiving the right compensation. An experienced family law attorney may help their client know how to structure such an arrangement.
Transfer to children
Sometimes, the easiest solution to dividing a family business upon divorce is to transfer the entire business to adult children. Many parents wish to give their business to their children someday, and this step can be completed earlier in the event of a divorce. This also eliminates conflict that often arises if divorced spouses are both involved in the management of a business.
Sell the business
If spouses cannot decide how to deal with a business upon divorce, it might make sense to simply sell the business and split the proceeds from such a sale. However, it is important to speak with an experienced family law attorney and an accountant before selling a business to review all tax consequences and other considerations of a sale.