When divorcing spouses have equal ownership in a business, yet do not want to stay in business together once their dissolution is finalized, what happens to the business? In a state like Arizona, which recognizes community property law, parties to a divorce have a couple of different options if they own a business together.

Option 1

One spouse becomes the sole owner of the family business, and in exchange, the other spouse assumes ownership of the marital residence and pension plan.

Option 2

In exchange for sole ownership of the family business, one spouse “buys out” the other spouse by paying them half of the business’ value.

Option 3

If they are confident that they can get along in a business setting, divorcing spouses can both decide to keep their ownership of the family business.

It is important to note that while option #2 is often the best option, it can also cause lots of issues if the buyout is not handled properly. Figuring out the fair market value of a family owned business in an Arizona divorce case is a very complex process. The best way to handle the buyout of a spouse is to enlist the help of a certified public accountant, business attorney and divorce attorney. Therefore, Arizona business owners going through a divorce should look for full service law firms that can offer them access to attorneys with different backgrounds.

If option #3 is selected, and each spouse wants to hold on to their 50 percent ownership of the business post-divorce, it is critical for the final agreement to include some sort of buyout provision. This can serve as valuable protection against any future issues. If the 50/50 business ownership plan doesn’t work out as planned, a buyout agreement can mitigate any complications and will also protect the business from crumbling if disagreements arise.

If you are an entrepreneur or business owner in the Phoenix metro area going through a divorce or are about to file for divorce, look to the law firm of JacksonWhite for assistance.


Call the Family Law Team at (480) 467-4348 to discuss your case today.

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