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How may a business protect its ownership shares in divorce?

As someone who owns part of a business, a divorce poses a potential problem for your company. Because your business shares count as assets, your spouse may have a claim to some of them in a divorce settlement. This could endanger your business or at least saddle it with your spouse as a co-owner, which your business partners may not want.

Fortunately, there are ways to address this possibility. Business.com explains that for you and your co-owners to retain control over any shares you might lose in a divorce, you may arrange for a buy-sell agreement to dictate what happens to your shares.

How a buy-sell agreement can work

Your business may draft a buy-sell agreement that all partners will sign. In the event a divorce settlement awards some of your shares to your spouse, the buy-sell agreement will require your spouse to sell the shares back to the business or to your other partners.

In this way, your spouse will receive the value of the shares but not retain the shares themselves. This removes any interest your spouse has in the company, so your spouse cannot make decisions that affect the operation of the business.

Include a valuation formula

Your buy-sell agreement should place a value on the shares. The agreement could include a set amount for the business to buy the shares back or a valuation formula that will determine how much the shares are worth.

Including a method of valuing the shares is important. Without it, you and your spouse may fight over how to appraise the shares, which could drag out the divorce. Agreeing to a valuation method beforehand may instead speed up the sale of your shares and avoid an unnecessary delay in your divorce.

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