How To Divide Your Business in a Divorce In Tennessee
Dividing Assets Can Make Divorce More Complex
When a couple goes through a divorce, assets and liabilities are split. The court will classify property as either marital or separate – then place values on the property, and then distribute the property amongst each of the spouses.
Some types of property is easier to distribute and divide than others. Vehicles will need to be split, homes or residences will need to be split, etc. To distribute the residence, often times the spouses will agree to sell the house and split the proceeds. Other times, one party may want to stay in the house, and in these cases one spouse would have to buy out the other spouse. Along with this a property evaluation would need to be performed to understand what a fair value of the home or residence would be.
One asset that can be particularly difficult to divide is a family business. There are typically three methods often used when dividing a business interest.
THE BUY OUT
This is where one spouse buys out the other spouse’s portion of the business.
First a valuation must be placed on the business. For example purposes, if both spouses can agree that the value of the business is $1,000.000.00 then the spouse keeping the business would owe the other spouse $500,000. There are many calculations and valuations that must be done in order to ensure that each spouse is getting their fair share in these cases. It is ALWAYS best to consult with a family law attorney for help.
A buy out can be structured in a few different ways, this can be a lump sum payment or installment payments, etc. In some situations, assets from the home, IRA, or 401k may be used to perform the buyout – it is important to understand that these events may have tax implications and these implications must be factored in to make sure each party gets their fair share. These cases can get complicated and there are many things to consider.
CO-OWNERSHIP OF THE BUSINESS
Some parties may decide to continue to jointly own the business after the divorce. Under amicable circumstances each person could continue to co-own and run the business after a divorce. Some co-ownership arrangements exist where one spouse continues to run the business while the other agrees to accept payments from future business profits to satisfy their share of the marital assets. Co-ownership only works when both parties are amicable and can continue to trust and respect one another.
SELL THE BUSINESS OPTION
Each spouse can be compensated for their interest in a business by simply selling the business. This option will not work if one spouse wishes to continue to operate the business.
A divorce and family law attorney can help you understand your options and the pros and cons of dividing a business during a divorce to make sure that your rights are protected. It is important to know and understand your rights so that all implications and consequences are thought out and planned for.
You can learn more about – How To Divide The Family Business In A Divorce @ FORBES. The article discusses how working with a lawyer and a trusted team of advisors can help you determine the solution that makes the most sense for your financial well-being.
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