Can I Sell My Business Before Divorce?

Splitting up a spouse’s company in a divorce can be a tricky business. Even if one spouse has done all the work to start the business and build it into a successful enterprise, the other party is still usually entitled to a portion of it.

The owner spouse can probably sell it while the divorce is pending, but he or she will most likely have to compensate their partner for the share of its value.

Ownership Rights

If your spouse has no ownership rights of his or her own in the business, you are free to sell it before the divorce is final. Filing for divorce does not impact your decision-making power as a business owner.

Keep in mind, however, that most courts will count the business as marital property, so you will still have to compensate your spouse for their share of the company.

If, like a lot of small, family-owned businesses, you and your spouse share ownership of the company, you can’t sell it without his or her consent.

Property Distribution Rules

Where you live will have the biggest impact on how much of your business you will have to hand over to your spouse.

The majority of states follow the equitable distribution rule, which divides property fairly, if not always equally. In equitable distribution states, courts consider various factors, like length of marriage and the parties’ incomes, to determine how much to award each side.

Nine states apply the community property rule, which splits all marital property down the middle.

Business Valuation

If the non-owner spouse is entitled to part of the business, it must be valued by a professional business appraiser.

Appraisers are well versed in identifying and applying the appropriate type of valuation for the particular business, which includes the income-, market-, and asset-based approaches.

Business valuation appraisers examine a variety of data, from tax returns to inventory, to put a final figure on a company’s total worth.

Restraining Order

Your spouse can prevent you from selling your business if he or she obtains an order from the court specifically restraining you from doing so while the case is pending.

If your spouse can persuade the court that their share of the business is in danger of being depleted or damaged before the divorce is final, the court might temporarily restrict you from selling, transferring, or otherwise compromising the business until the case wraps up.