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3 options for your family business when you divorce

April 24, 2019 | Firm News

If you own a family business in Colorado with your spouse and are considering ending your marriage, one of your biggest concerns likely is what will happen to your business once you divorce. Obviously, this business represents one of your marital assets, and you likely know that in Colorado, marital assets must be equitably distributed between you and your spouse during a divorce.

But how do you and (s)he go about equitably distributing your family business? Usually, couples do it by means of one of three options.


If both you and your soon-to-be ex-spouse are ready to move on to other professional challenges and opportunities, your best option may be to sell your business and divide the sale proceeds between you. Be aware, however, that a sale could take some time and you may need to engage the services of a professional business appraiser to determine the following:

  • How much your business is worth overall
  • How much you and your spouse’s respective shares are worth
  • A fair and credible selling price

The other thing you need to realize is that depending on the strength of your local commercial market, it could take anywhere from a few months to more than a year to sell your business. Once you do, however, both of you can expect to receive a substantial inflow of cash that you can use however you wish, including starting new businesses.

2. Buyout

If one of you has particular ties to your family business and wishes to remain its owner after your divorce, but the other would just as soon walk away and pursue other interests, a buyout by the staying spouse of the leaving spouse’s business share may be your best option. Again, you probably will need to engage the business appraiser so you will know, not only the overall worth of your business but also the value of your share and that of your spouse.

Once you know these, then whichever one of you chooses to stay with the business must decide how to pay whichever one of you chooses to leave. Generally, there are three choices:

  • Trade other nonbusiness marital property for the leaving spouse’s share of the business
  • Obtain venture capital or a new partner who will bring sufficient cash into the business to cover the leaving spouse’s buyout price
  • Obtain a business loan whereby the staying spouse can pay the leaving spouse over time and with interest

3. Continued joint ownership

Your third option, that of continued ownership and operation of the business after your divorce, may seem highly unintuitive at first blush. After all, you and your spouse are about to end your marital relationship. Can you really continue to work together in your business? Continued post-divorce joint ownership requires each of you to be a mature adult who can separate his or her professional life from his or her personal life.

If the two of you enjoy working together even though you no longer wish to live together, continued joint ownership of your family business may be your best option. But if you choose to go this route, experts recommend that you negotiate a partnership agreement that both of you will sign after your attorney drafts it. It should not only delineate which business activities and responsibilities each of you will assume, but also include a detailed buyout provision should one of you wish to leave in the future.

Unfortunately, owning a family business with your spouse puts one more complication into what could already be a complicated divorce situation for you. With any luck at all, however, you and your spouse can devise a reasonable and equitable way to distribute your business without having to litigate the issue.

Stahly LLC is now Stahly Mehrtens Miner LLC, with three offices in Boulder, Denver and Steamboat Springs. Learn More