Owning a franchise adds a layer of complexity to any divorce. If you and your spouse are separating in Colorado, understanding how state law treats a franchise business can help you protect what you built.
How Colorado law classifies franchise ownership
Colorado follows the principle of equitable distribution. Under C.R.S. § 14-10-113, courts divide marital property in proportions they deem just after weighing each spouse’s contributions and financial circumstances.
A franchise started during the marriage is typically marital property. If you owned it before the marriage, it may remain separate property. Courts can still divide any increase in value that occurred during the marriage, even if only one spouse ran the business.
Why franchises are harder to divide than other assets
A franchise is not a bank account you can split down the middle. Its value often ties directly to the owner’s involvement and the franchisor’s ongoing approval. Three factors make division more complicated:
- Franchisor consent: Most franchise agreements require the franchisor to approve any ownership transfer. If a spouse does not meet the franchisor’s qualifications, the franchisor may block the transfer entirely.
- Business valuation: Courts need a dollar figure before they can divide anything. A professional appraiser reviews assets, income and cash flow to set a fair market value.
- Operational continuity: Divorce can disrupt daily operations. Violating brand standards during proceedings could prompt the franchisor to intervene.
Addressing each of these issues early reduces the risk of losing value before you reach a settlement.
Common ways a franchise gets divided
Spouses generally have a few paths available when dividing a franchise. Here’s what you can do:
- Buyout: One spouse purchases the other’s share using cash or other marital assets such as the family home or investment accounts.
- Sale: Both spouses agree to sell the franchise and split the net proceeds.
- Co-ownership: Both parties continue to operate the business under a new written agreement. This option works only when both sides communicate well and trust each other.
Reaching a voluntary agreement almost always preserves more value than a court-ordered outcome. A judge who cannot get the parties to agree may order a sale or an equal split that benefits neither side.
You may speak with an attorney before making decisions
Franchise division in a Colorado divorce involves contract law, business valuation and family law all at once. An attorney can help you understand your options and negotiate an outcome that reflects the business’s true value.