If you and your spouse own a business together, divorce can be particularly complicated. The best way to protect your business in a divorce is to detail what happens to it in a prenuptial agreement or a buy-sell (or buyout) agreement.

Is a Buyout Agreement the Solution?

A buyout agreement stipulates what will happen to the business if one owner dies or otherwise leaves it. Generally, the spouse who leaves the business is required to sell the interest that he or she receives in the divorce settlement to the company's other owner(s) at a price determined via a valuation method.

Most couples with a family business have the bulk of their net worth in the business, and it is each spouse's primary personal asset. Therefore, often one doesn't have enough money to buy out the other without going into serious debt. One possibility is a property settlement note, which allows one spouse to buy out the other over an extended period of time.

If the business is carrying a significant amount of debt, you may consider either seeking an investor or adding a partner. Some couples choose instead to sell the business and split the proceeds. However, it can take some time to sell a business, so you may be left dealing with your spouse as a business partner for awhile.

Can You Remain Business Colleagues After Divorce?

Some couples are able to remain business owners together even after they've called it quits as a couple. If you elect to do this, it's essential to draw up a shareholder agreement that stipulates that either spouse can buy out the other one and how the business would be valued in such a buyout.

If you and your spouse are considering divorce and you don't already have a legal agreement in place that stipulates how the business will be handled in the event of a break-up, it's important to determine what your options are for dealing with the business. Experienced legal and financial guidance is essential for helping you come out of the transaction as successfully as possible.