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Dissolving a business during divorce? Here's what you should know

As a couple who has run a business together, things might have gone well for a long time. Now that you're separating, the best option for you might be to dissolve your business. If you decide that you don't want to keep running it and can't work together in a partnership, you have the option to dissolve it instead.

You could end up with liabilities as well as assets

When you close a business, which happens when it's dissolved, there are both assets and liabilities remaining. You may have items such as cameras or processing equipment if you were photographers, or if you have a restaurant, you might wind up with industrial freezers and other kitchen appliances.

These assets need to be divided up, as do the liabilities, like contracts that need to be completed or debts that have to be repaid. In the event that you're dividing your business during your divorce, it's possible that you could end up splitting both 50/50, but you may also be able to come up with an equitable agreement that both parties can accept depending upon your incomes and other factors.

If there's no partnership agreement, you'll need to negotiate

In case the two of you had no partnership agreement, negotiation is going to be key to a successful dissolution. A partnership agreement usually states how much each partner will receive or pay in the event of a dissolution. Without it, your attorneys will need to help you

negotiate for the best deal.

Continuing independently can be another option

If at first you think dissolving the business is the best option, but you reconsider after recognizing your potential losses, you may want to consider buying out your partner instead. A third-party valuation can help determine the worth of your business, allowing you to purchase your partner's half with a fair amount of compensation. Since a divorce is also taking place, a mediator or your attorney can help you negotiate and divide the business as one of your marital assets.

Regardless of the route you choose, your business should be transferred or dissolved according to state law. There are many legal documents to complete and file properly with the court to make a legal record of this transaction.

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