If your spouse has any ownership stake in your business, you may have to sell your company to split the proceeds in your upcoming divorce. You might prevent this from happening if you can buy out your spouse. If you succeed, you will be the sole owner of your business and your spouse will have no further stake in your enterprise going forward.
As the American Bar Association explains, there are different ways to go about buying out your spouse. Depending on your circumstances, you may find one of the following options to be the best approach for you.
Paying a lump sum
Buying out your spouse may be simple. You have enough money on hand, so you pay your spouse in a single sum. If you do not have enough in cash, you may finance your buyout through other means like stocks and bonds. You might also use some of your personal assets to fund a buyout, though you should take care not to drain resources that you will need after your divorce is complete.
Paying with outside financing
You may not have the money to buy out your spouse now, but that does not mean you cannot seek an outside source of financing to back your purchase. You might secure a loan from a commercial bank or a lender you regularly patronize. Your lender may want to finance your buyout just to keep your business in operation and ensure your continued patronage.
Paying over time
Another alternative is to not pay your spouse all at once. If you can work out a structured agreement, you could make a series of payments on a scheduled basis. This may work if you cannot secure financing at the present moment. Additionally, some people prefer this option because they may derive tax benefits from using a structured settlement.
Trading other assets
If financing remains a problem, you may think about whether you have any assets that you would trade for your spouse’s ownership. For instance, you and your spouse may have equal ownership of your marital home. If you choose, you might give up the remaining ownership in exchange for your spouse’s claims on your business. Combining one or more assets in a trade may be just what you need to hold on to your business.