Barbara J. Katzenberg, Attorney at Law
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Who gets custody of the family business?

Is there anyone in Massachusetts who enters into a marriage thinking he or she will end up divorced? We can safely say the answer is -- not many. And is there anyone who starts a business with their spouse who drafts an exit strategy along with the incorporation papers? The answer to that too is -- not many.

And yet the division of property for a divorcing couple who own a business can be complicated, and can either leave the business in the hands of just one spouse, or can ruin the business for a variety of reasons.

According to a recent article, when a married couple owns a business together and they divorce, the business can become part of the division of property. There are several options available, and each one has its own strengths and weaknesses.

  • Stay in business together (as 50-50 partners?).
  • One spouse buys out the other spouse (business valuation is critical).
  • Sell the business and split the proceeds.

News sources reveal that 80 percent of the time the husband and wife do not have a written business agreement. In most cases, the husband will attempt to buy out the wife, although a buy-out could go in either direction.

Knowledgeable sources recommend a pre-divorce shareholder agreement as either part of the divorce, or during the marriage. It should cover the following:

  • Business buy-sell provisions
  • Business valuation methods
  • Shareholder transfer methods
  • Third-party shareholder purchase options

Divorce is nearly always a difficult time, and can be made simpler, less stressful and less risky with the help of experienced professionals.

Source: The Globe and Mail, "Divorces mess up firms as much as families," Wallace Immen, June 4, 2012

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