For a business owner, divorce risks go beyond personal assets. An ownership stake often makes up much of their wealth and that weight can make the business itself a central issue in property division. A well-drafted buy-sell agreement helps by setting clear rules for transferring ownership. However, its protections have limits once a divorce is involved.
Because of those limits, Ohio business owners need to know exactly what such an agreement can and cannot do.
How a buy-sell agreement can help in a high-asset divorce
A well-drafted agreement can address the following concerns that may arise during property division:
- An unwanted business partner: A buy-sell agreement can establish restrictions on transferring ownership interests. With this in place, a former spouse cannot acquire an ownership interest and become involved in the business.
- A framework for a buyout: If the owner’s interest must be addressed as part of the divorce, the agreement may establish procedures for another owner or the company to purchase that interest. This can help preserve the business’s existing ownership structure.
- Business valuation issues: A buy-sell agreement may include a formula or appraisal process to value a business interest. This can help the parties determine the business’s value during a divorce. However, the divorce court may not have to use the value stated in the agreement.
- Business continuity: A carefully structured agreement can help limit disruptions to the company’s operations when an owner’s personal circumstances change. For a business that represents a significant portion of the family’s wealth, maintaining stability can be an important consideration.
These benefits are why many business owners create buy-sell agreements well before divorce becomes a concern. They often include these agreements as part of routine succession or partnership planning.
Protecting your business interests during divorce
A buy-sell agreement can be helpful, but business owners should understand how Ohio divorce laws may affect it. An attorney can help business owners understand their legal options and protect the business they have built.