If you own and operate a business with your soon-to-be ex-spouse, you may need to consider how a divorce could affect it. As noted by the Internal Revenue Service, a sole proprietorship may continue operating after a divorce, but it must have only one owner. An ex-spouse may, however, work as a paid employee.
As noted by Forbes, your current business format may need restructuring. Two ex-spouses, for example, could form a partnership to operate a continuing business. Different onsite work schedules could allow formerly married individuals to work without direct interaction with each other.
How could spouses use business interests to “buy” other marital assets?
According to the American Bar Association, an ex-spouse may give up his or her interests in a private business in exchange for other marital assets. The arrangement could require a written agreement stating how much a spouse may receive in future payments from business profits.
An agreement could also outline how one spouse remains responsible for managing and operating a business. An ex-spouse could receive a part of the profits until it equals a fair payment for his or her share of relinquished marital assets. It may take several years, however, until payments reach the agreed-upon amount.
What could help two ex-spouses to continue running a business?
Kiplinger’s Personal Finance describes how a written contract could outline each spouse’s responsibilities and pay after a divorce. You may also include terms specifying how to resolve disputes. Communicating the terms of the arrangement with employees could help them continue providing quality services or goods to customers.
A divorce may provide an opportunity to draft an agreement to manage a shared business in the future. Two soon-to-be ex-spouses could discuss how to operate an enterprise together. You may also negotiate a plan to sell the business and divide the proceeds.