Divorce can be an overwhelmingly emotional and exhausting experience, especially when complex assets such as a family business are involved. A divorce that encompasses a family business adds an additional layer of complexity to an already intricate process. Fortunately, Ohio law provides guidance on how to navigate the challenges that arise when trying to handle a family business during a divorce case in the state. Let’s take a closer look at what happens to a family business during an Ohio divorce case.
Identifying the Business as Marital Property
Ohio follows the principle of equitable distribution, meaning that in a divorce, marital property is divided fairly and equitably between the spouses. Marital property generally encompasses all assets and debts acquired by either spouse during the course of the marriage.
With respect to a family business, it can be considered marital property if it was established or obtained during the marriage. Additionally, if marital funds were utilized to develop or operate the business, it could also fall under the category of marital property. Therefore, the initial step in handling a family business during a divorce is to conclusively identify it as marital property.
Valuation of the Family Business
Once the family business is determined to be marital property, the following step is to ascertain its value. Evaluating the worth of a family business can be an intricate process, often necessitating the expertise of a professional appraiser.
Upon determining the value of the family business, it is vital to ensure that both parties possess an accurate understanding of the business’s financial status. This comprehensive comprehension encompasses familiarizing oneself with the business’s assets, liabilities, and income streams.
Dividing the Business in a Divorce
Following the valuation of the business, the subsequent stage involves determining how the business will be divided between the divorcing spouses. Various options are available in this scenario, including:
Buyout
One of the spouses can opt to buy out the other spouse’s share of the family business. This option necessitates the purchasing spouse providing the other spouse with their portion of the business’s value, typically in cash or alternative assets.
Co-ownership or Continuation of Joint Ownership
It is also possible for the spouses to choose to maintain joint ownership and continue operating the business together. However, this option requires a high level of cooperation, communication, and agreement between the spouses, which may not always be feasible or advisable.
Sale of the Business
Another option is to sell the entire business and divide the proceeds between the divorcing spouses. This approach may become necessary if neither spouse desires to continue operating the business or if it is financially impractical to sustain joint ownership.
Protecting the Business During the Divorce
Divorce proceedings can be protracted and acrimonious, and the process of assessing and dividing a family business can be time-consuming and costly. Consequently, it is imperative to take proactive steps to safeguard the business throughout the divorce process. Some measures to consider include:
- Ensuring meticulous maintenance of accurate financial records.
- Continuing to operate the business without interruption or deviation.
- Consulting with legal professionals before making any significant business decisions or taking any major actions.
- Ensuring the business remains fully compliant with all legal and regulatory obligations.
Conclusion
Dealing with a family business during a divorce undoubtedly presents a daunting and intricate process. Nonetheless, seeking professional guidance from experienced divorce attorneys and business appraisers can significantly alleviate the challenges involved and safeguard the interests of all parties concerned. With the appropriate guidance and proactive preparations, a family business has the potential to weather the divorce storm and continue flourishing in the future.