Divorce & Joint Ventures

By Beverly Bird

Spouses co-owned and operated more than a million businesses in the United States in 2011 according to the National Federation of Independent Business. It’s safe to say that some of those spouses may divorce and business ownership can confound the already difficult process of dividing assets and debts when spouses part ways. However, joint ventures are sometimes easier to deal with than other partnerships or businesses. Technically, a joint venture is something of a one-time event.

Spouses co-owned and operated more than a million businesses in the United States in 2011 according to the National Federation of Independent Business. It’s safe to say that some of those spouses may divorce and business ownership can confound the already difficult process of dividing assets and debts when spouses part ways. However, joint ventures are sometimes easier to deal with than other partnerships or businesses. Technically, a joint venture is something of a one-time event.

Dissolving the Venture

By definition, a joint venture occurs when two or more individuals pool their resources to achieve a single money-making result. For example, you might be a great writer and your spouse is an excellent photographer. You might have joined forces to travel around the country, photographing and writing the history of all Major League baseball parks for publication. If the project is not completed when you decide to break up, you can simply abandon it. If you haven’t realized any profits yet, you’ll lose the time you invested, but your joint venture is not technically an asset subject to division in divorce. If you accepted an advance from a publisher for the project, it’s of finite value and you may already have spent the money at the time of your divorce. Otherwise, you can easily split it 50/50 -- but you'd have to finish the project before dissolving your venture.

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Selling the Business

Some joint ventures are more complicated. You and your spouse might have established a business entity for the express purpose of promoting your joint idea. In this case, if you and your spouse can’t negotiate a resolution, the court may direct the business’s sale as the only equitable solution. If you both equally contributed to its value, or you live in a community property state, the court would most likely divide the proceeds from the sale evenly between you. However, if you live in an equitable distribution state, judges have the discretion to order an uneven split if they believe one spouse contributed more. For example, if your spouse worked daily at the business and oversaw its operation while your contribution was more intellectual, or you contributed your time on only an occasional basis, your spouse could conceivably receive 60 to 70 percent of the sale proceeds with you receiving the balance.

Buy-Outs

Another option is for one spouse to buy out the other. This usually involves bringing in a professional to appraise the value of your enterprise because several factors contribute to it. You may have purchased property to run your operation on and own equipment. The name you’ve built for your operation also has value. After an appraiser determines what your enterprise is worth, and if you want to keep the business, you would have to come up with the funds to buy out your spouse’s percentage interest. You might be able to do this by relinquishing your share of the equity in your home or retirement benefits so you don’t have to make an actual cash payment.

Maintaining the Enterprise

Generally, joint enterprises exist because two or more individuals bring unique skills or talents to the table to make it work. If you or your spouse leaves the equation, the enterprise might flounder, or at least become less successful. Some spouses are able to separate emotions from business sense and maintain their enterprise post-divorce. Family courts will not force you to sell the business or buy your spouse out if you want to try to make it work. However, you might want to incorporate buy-sell terms into your divorce decree to determine how you’re going to handle the situation if co-ownership doesn’t work out. You can also create a buy-sell agreement separate and apart from your decree, determining what happens if one of you wants to leave.

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