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Marital Property and “Earn Out” Purchase Payments for Sale of Businesses

There are many creative ways to structure the sale of a business to attempt to reduce the amount divided in a property division.  This one did not work. In re the Marriage of Gill No. A16-1421 (Minn. App. 8/14/2017) Reversed and remanded. Judge John R. Rodenberg. When the marital interest in a business entity is sold and includes, as part of the sale price, a provision for “earn-out” payments based on future company performance, the earnout payments are marital property, notwithstanding purchaser’s employment of one of the spouses under a separate employment agreement during the “earn-out” period. Analysis: When a purchase contract for a business specifies...

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