Dividing Three-Way Business Partnerships

Dividing business assets is one of the trickiest parts of a divorce. The true value of a business is difficult to determine, and when third parties are involved the process becomes even more confusing. Partnerships are a popular form of business ownership which allows multiple people to open a business with shared ownership. But what happens when someone involved in a partnership gets a divorce? On this blog we’ll look at this sample question: “I’m in a three-way partnership and my spouse wants half!”

Determining Business Value

The first step to dividing any business assets is to figure out the value of your business. This is not an easy process, and it’s not advised you trust a spouse who claims they can adequately do this on their own. It’s somewhat simple to hide business assets and significantly lower values and reduce obligations in divorce cases. Instead, it’s strongly advised you hire an independent, third-party business appraiser, who is usually a CPA who specializes in forensic accounting. These individuals have the ability to sniff out any suspect accounting practices or hidden assets to give you a fairly accurate true valuation of how much a business is worth.

Dividing the Results

Let’s start off by making two assumptions to make things easy: the spouse demanding half is not a fellow partner in the business, and the business is equally held with all three partners. In this situation the solution is a fairly simple one: the partner must sell off his share to the other two partners, and the capital acquired is then divided in half. This is perhaps the most ideal way of tackling this issue since it allows the business to continue and allows the spouse asking for half to receive their fair share.

But what happens when the spouse demanding half is a fellow partner in the business. Then things get a little more complicated. For starters both spouses should technically be equal owners so each should technically have half of the assets mutually owned by the couple already. Should both spouses want to stay involved as business partners (which is possible to do successfully) they can simply agree to keep their third of the business and nothing changes.

However if one of the divorcing spouses wishes to get out of the partnership, then what will most likely happen is they will sell their share of the business to the remaining two partners, making them each owners of 50% of the business. So therefore, the spouse who is asking for half of the marital assets could then receive half of this amount, an amount equaling 25% of the total value of the business. Being able to pay this amount may involve the other spouse having to sell off their share as well.

Either way, it is extremely difficult to obtain a divorce without selling off your business. If you need assistance protecting your claim to your property and ensuring your rights are preserved, it’s highly advised you also retain the services of a skilled Pasadena attorney.

When you call Gille Kaye Law Group, PC, you are putting more than eight decades of combined experience on your side for your divorce case. Our attorneys have helped numerous clients seek an optimal solution for their family law matters, and can guide you through every step of your case with personalized, compassionate counsel that has your best interests at heart. We take great pride in being trustworthy, valuable allies for each of our clients, and we have earned numerous honors for our service, including earning the title of Board Certified Family Law Specialists by the California State Bar Association Board of Legal Specialization.