Divorce Attorneys for Business Owners | Dividing a Business in Massachusetts

Women talking around table at office.

In many divorces, a critical asset may be a business.  Such businesses can range from “mom and pop” businesses that were started and built by both spouses, to professional practices that may involve only one spouse, to larger “closely-held” companies that may have dozens or more employees.

Regardless of the type of business, in a divorce, the business (or the value of the business) may need to be divided.  In some cases (especially with a professional practice involving only one spouse), it may be best that one spouse retains the business entirely, and that the other spouse be compensated for his/her share of the value of the business.  In other cases, the business can be sold (and the proceeds divided between the spouses), or the spouses continue as business partners.

The division of business assets can be one of the most challenging aspects of divorce, as there can be significant issues concerning valuation of the business, as well as how one spouse may be compensated for his/her share. There is no single approach to dividing a business, or the value of a business, in a divorce.  Instead, each case is unique, necessitating a custom strategy that is tailored to the particular situation.  At Goldman & Sidgwick, we ensure our clients understand all the available options for dividing their business so that they can determine the best resolution that aligns with their specific long-term goals and objectives.


Business Division FAQs

Yes.  Unlike many other states, Massachusetts does not distinguish between separate and marital property when dividing assets in a divorce.  Essentially, a court can divide any property owned by either spouse, regardless of whether it is held individually or jointly, and regardless of when and how such property was acquired, including a business or a party’s interest in a business, even if such business was started before the marriage.

Massachusetts is an equitable distribution state, meaning that the court divides all of a married couple’s assets (including a private business) equitably, but not necessarily equally.  See Massachusetts General Law, 208, §§1A, 1B, 34. This means that all assets and debts are subject to an equitable division in a divorce (unless specified otherwise in a valid pre-nuptial or post-nuptial agreement), including a business or an interest in a business.    Addressing and determining the fate of a private business in a divorce can add a new set of challenges to an already complicated process.  It is best to contact an experienced attorney to guide you through this process.

As a starting point, it is vital for each party to identify their intentions concerning involvement in a business.  In some cases, this determination may be relatively simple.  For instance, if the business is a professional practice and one spouse has never been involved in the day-to-day practice of the business, then such spouse will likely not want to have any future involvement in the business. In other circumstances, such as the situation in which both spouses are involved in a business on a full-time basis and where their income is a direct result of their efforts, this situation can be much more complicated.

In Massachusetts, there are several common ways to divide a company during a divorce, including:

  • Business Buyout of One Spouse’s Interest. This is the most common option when the business is a professional practice where only one spouse is the practicing professional.  Here, one spouse buys out the other spouse’s interest based on an agreed-upon value, which often is determined after an appraisal.  The “buyout” may be done through an adjustment in the division of marital property.  For example, if a house and business have approximately the same value, one spouse may be awarded the house while the other spouse is awarded the business.  In the alternative, one spouse may pay a lump sum “buyout amount” to the other spouse.
  • Structured Settlement.  In the event that one spouse does not have the financial means to purchase the other spouse’s interest outright, a structured settlement can be utilized to allow the purchasing spouse to make payments (on a promissory note, for example) over some time period.
  • Maintain Joint Ownership of the Business.  Divorcing spouses may have emotional ties to a company and desire to continue owning and operating a business together.  This approach may not be an option for many divorcing spouses.
  • Sell the Business.  Another option to dividing a business is to sell a company outright and split the proceeds.

Even though Massachusetts is an equitable distribution state, it is possible to exclude a business from being included as a marital asset by using a valid pre- or post-nuptial agreement.  If you are interested in protecting your business from being divided in a divorce through a prenuptial agreement or if you have a prenuptial agreement and would like to know if it is likely to be enforceable, call our office to schedule a case evaluation.