If you are business owner in Tennessee, whether it is a corporation, LLC, or partnership, there are special considerations that must be taken into account when dividing up the marital property in a divorce. If the business has been formed or grown during the marriage, most likely part of the equity is going to be considered marital property, and entitled to an equitable division between the two spouses.
Scenario #1: One Spouse Business Owner
- The first major hurdle is determining what the equity is. There are experts that can value a business, but as with any appraisals, vary rarely are two appraisals going to be the same. Often each party hires an appraiser, and then an amount is agreed to somewhere in the middle of the two appraisals.
- Once the equity is determined, the next step is determining how to provide the non-business owner spouse with his or her equity. Often this is done either through a cash settlement, payments over time, or by providing that spouse with other marital assets to make up the difference.
Scenario #2: Both Spouses Own Business
- Occasionally we see divorcing spouses that both own a business. This can be more complicated than Scenario #1, as it is often not practical for both spouses to continue to run the business. A good option can be to sell the business and split the equity. If that cannot be agreed to or is not practical because of the type of business, the next option is to try to agree to one spouse continuing to run the business, while the other gets a buy-out of the equity.
As you can see in the two basic scenarios above, dealing with a business during a divorce has specific needs, and one of the most important steps is to have a good buy/sell agreement when starting a business. A thorough buy/sell agreement will address how the business is handled in case of divorce. If you don’t have a buy/sell agreement with your business, you should contact a licensed Tennessee business lawyer.
Luke D. Bottorff
Nashville Business Lawyer
McNulty & Associates, PLLC
211 Printers Alley, Suite 400
Nashville, TN 37201
615.829.8250
[email protected]
