If you are a business owner going through a divorce, you might worry about your company’s future. In Massachusetts, the court usually treats a business as a marital asset. This means the court must divide it equitably, but not always 50/50.
If you want to buy out your spouse, you must follow a series of steps to gain full ownership.
How do you value a business in Massachusetts?
Before you buy out your spouse’s interest, you must determine the business’s value. In Massachusetts, courts have significant flexibility. Judges often look at the business value as of the trial date. However, they can choose a different date, such as the date of separation. They do this if it more fairly reflects when the marital partnership ended.
Experts use three main methods to find this number:
Market approach: Compare your company to similar businesses that recently sold
Income approach: Calculate the value based on your future expected profits
Asset approach: Add up the value of everything the business owns and subtract its debts
Choosing the right method ensures no one overcharges. A neutral appraiser can help prevent long-term disputes over the final price tag.
Can you trade other assets instead of paying cash?
Yes. A very common strategy in Massachusetts is asset offset. If you do not have the cash to buy your spouse out, you can give them a larger share of other marital property instead.
For example, your spouse’s share of the business may be worth $200,000. Instead of writing a check, you might let them keep full equity in the family home. You could also give them a larger share of a 401(k) retirement account.
What if you cannot afford to pay everything at once?
If you lack enough assets to trade, you can set up a structured buyout. In this setup, you and your spouse sign a promissory note.
Keep in mind that if you do not specify an interest rate in writing, the law may apply a default rate of 6%. A structured buyout allows the business’s cash flow to fund the transition over time.
Why do you need a family law attorney?
Handling a buyout alone is risky. Small paperwork errors can lead to major financial losses or future lawsuits. A skilled attorney ensures your settlement agreement is legally binding and protects your right to run the business without interference.