Many Wisconsin couples run small businesses together and, when they divorce, it is not uncommon for one spouse to transfer their ownership interest to the other spouse as part of the divorce settlement.
Often it boils down to one spouse not wanting to continue to work alongside the other when both have played an active role in the business, or, one spouse may simply not play a role in the operation of the business and wishes to transfer (sell) their ownership interest to an ex-spouse who does operate the business.
Beyond being financially compensated for their ownership interest, it is important for a spouse transferring an ownership stake in a private company to ensure that:
- the transferee spouse (the one receiving the ownership interest being transferred) provides the transferor a release of claims from both the business and the ex-spouse so that the transferor is not subject to any claims asserted by the business in the future. In a contentious divorce, a release from liability can protect a transferor from potential legal shenanigans lobbed at them from an ex-spouse in full possession of the business.
- they are protected from third party claims. It is important for the transferor to seek indemnity from the business for any future claims by a third party against the business. Say for example the business – and all previous and current owners – is sued (even years down the road) after the ownership interest is transferred in a divorce. Barring findings of bad faith or gross negligence on the part of the exiting spouse, a transferor should insist that the business indemnify the transferor against claims brought against the business.
As for the transferee – the spouse receiving the ownership interest from the transferor (the soon-to-be-ex-spouse) should:
- make sure the transaction is a clean break; that all rights, title and interests in the business are wholly transferred. Meaning that there are no retained interests to the business or its assets held by the transferor when completing the transfer.
Experience Matters – Call Our Business Valuation Divorce Lawyers Today!
When you are considering divorce and own a small business with your spouse, it is important to work with a skilled Wisconsin marital property division lawyer to ensure that the transfer of business ownership is properly executed. Contact the Wisconsin family law attorneys of Probst Law Offices for immediate assistance 414-210-3135.