Business ownership in a divorce
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Business ownership in a divorce

| Mar 24, 2020 | Firm News |

When a Michigan couple is getting a divorce and they both have ownership in a business, it is possible for them to reach an agreement on dividing property that satisfies them. Since it is difficult for most people to run a business together after they divorce, the solution might be for one person to transfer their share of ownership to the other person.

However, it might be that one person lacks the liquidity to buy out the other. In this case, the two might continue owning the company, but only one person would run it. There would also be what is known as a put/call option. This would allow the person operating the business to buy the other out at some point. The spouse who is not operating the company should have some rights, including certain veto rights. These veto rights would only deal with broad powers and prevent fundamental changes to the business, such as adding partners.

If one spouse is able to purchase the business outright from the other spouse, the other spouse should be indemnified from any claims connected to it. There may also be situations in which both spouses agree to continue owning and being active in the business. It may be important in this case to have a buy-sell agreement.

There may be a number of other assets individuals may need to decide how to divide as well. In many divorces, people are able to reach an agreement through negotiation and do not have to go through litigation. This means that more flexible arrangements may be possible. For example, instead of dividing a retirement account, one person might keep it while the other person keeps the home. Investments and valuable collections are among the other assets that can lead to complexities in property division.