How do you divide a business in a divorce in Minnesota?
Asked in Minneapolis, MN on January 9, 2025 Last answered on April 8, 20262 answers
Selected to Super Lawyers: 2011 - 2026 When spouses seek a divorce and one or both of them owns a business, the division of property and distribution of assets can be a bit complicated. You will want to protect your stake in the business and ensure that there is an equitable distribution of assets. Your best plan of action is to find a family law attorney with solid experience in business valuation cases.
The court has broad discretion in determining the value of the business. There are three well-accepted valuation methods: 1.) cost approach, 2.) income approach and 3.) market approach. While the courts have not set a specific formula, the Minnesota Supreme Court has established that for determining the value of a closely held business the numerous factors used by the Internal Revenue Service should be considered. Accordingly, due to the complex and detailed determination, a business valuation expert should be hired in most cases.
The business valuation expert who performs the valuation may be a neutral expert hired by both parties or may be a party’s own expert witness hired by one party. There are advantages and disadvantages to both, and it is important to know when and why one would be used instead of the other or which one is right for your case. It’s important that both parties remain involved in the business valuation process and provide the neutral expert or their own experts with the information necessary to ensure an accurate valuation of the business.
A court will generally award the business to the spouse who has been managing the business and appears most capable of continuing the business operations. A court will also consider whether the business was started before or during the marriage and whether or not the business grew in value during the marriage.
Unless the business interest is to be sold and the assets divided or unless it is divided between the spouses which is unlikely, the court will determine which spouse will maintain interest in the business and which spouse will receive a buyout and be paid an equitable share of the value of the business.
How a Business is Divided in a Minnesota Divorce
1. Is the Business Marital or Non‑Marital Property?
- Under Minn. Stat. § 518.58, assets are divided equitably—fairly, but not always equally.
- A business started during the marriage, or significantly grown using marital funds, labor, or efforts, is generally considered marital property, even if titled in one spouse’s name.
- If your business predates the marriage (or was inherited/gifted), it may still be partly marital—especially the increase in value during the marriage due to active efforts.
2. Valuing the Business
- Courts use expert appraisers (forensic accountants, business valuation professionals) to determine fair market value as of separation or trial.
- Common valuation methods include:
- Income approach (e.g., discounted cash-flow for earnings potential)
- Market-based approach (comparing sales of similar businesses)
- Asset-based approach (net of assets minus liabilities).
- Additional valuation factors: tangible/intangible assets, goodwill (enterprise vs. personal), industry outlook, size, and comparable sale data.
3. Division Options
Once a value is agreed upon, Minnesota courts and spouses typically settle division through one of several approaches:
Buy-Out
One spouse buys out the other's interest, often through lump-sum or installment payments.Sale & Split
The business is sold, and the proceeds are divided proportionally.Co-Ownership Continuation
Especially in professional practices or closely held firms, spouses may agree to continue co-ownership post-divorce, though cooperation and commitment are essential.Offset Arrangement
One spouse keeps the business; the other is compensated with other marital assets of equivalent value.
4. Factors Influencing the Outcome
Several factors shape the court’s decision or settlement negotiations—some statutory, others practical:
- Length of marriage
- Each spouse’s contributions (financial and non-financial)
- Economic circumstances (earning capacity, career prospects, health)
- Custody or caregiving responsibilities
- Potential impact on business operations and viability
Additionally, the court may consider how dividing or selling the business affects ongoing operations and both parties’ financial futures.
Why You Need a Strong Advocate
Navigating business valuation and division in a Minnesota divorce is intrinsically complex and fact-specific:
- Accurately classifying marital vs. non‑marital assets
- Choosing and applying valuation methods to reflect business reality
- Structuring practical division plans that protect your enterprise and future
Having a knowledgeable attorney and valuation expert guide this process is crucial to protect your business interests, maintain stability, and pursue an equitable outcome.
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