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The complexities of dividing a business in divorce

When a married couple who owns an Indiana business decides to get divorced, they could be in quite a bind. They might decide that they do not want to dissolve the business partnership along with the marital partnership. Deciding to keep running a business after a divorce is an unusual choice, but it is one of the options available. More commonly, one spouse will keep the company or the couple will agree to sell it.

The first step for business owners who are getting a divorce is to valuate the company. After this, they can put it on the market. If the company does not sell right away, they might need a plan to keep running it in the meantime. They may need to either continue working together or make arrangements for one spouse to keep running the business until it sells.

The most popular option is for one spouse to stay at the company and buy out the other spouse. The company might purchase the shares of the spouse who is leaving, but it is important to structure this purchase so it does not incur significant capital gains taxes. The spouse could also pay off the departing spouse over time using a settlement note. However, it's more ideal if one spouse has the liquidity to buy out the other outright. This is usually not considered a taxable event because of divorce.

A complex property division process may also involve splitting assets such as a pension plan or 401(k) and valuable collections. To divide these assets, a document called a qualified domestic relations order must be completed and approved by the plan administrator. An attorney could help make sure a divorcing spouse follows every step during the property division process.

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