Once your equipment has a value attached to it, the next question is usually the one that actually keeps you up at night: can you afford to keep the shop? A buyout means paying your spouse their share of the equipment's value so you can hold onto the business, and the math behind that number matters as much as the number itself.
This isn't about whether you want to keep the shop. Most owners do. It's about whether the buyout is actually structured in a way you can survive financially, because a buyout that sounds fair on paper can still sink a business if it's paid the wrong way.
The Basic Buyout Formula
At its simplest, a buyout is your spouse's ownership share multiplied by the equipment's net value, what it's actually worth after subtracting what's still owed on it and what it would cost to convert it to cash.
How the number gets built
- Start with fair market value. What the equipment would sell for between a willing buyer and seller, not a rushed or forced sale number.
- Subtract any outstanding loan balance. Only the equity in the equipment, not the full value, typically factors into the marital estate.
- Subtract estimated transaction costs. Even if you're not actually selling, some settlements account for what it would cost to convert the asset to cash, brokerage fees, transport, that kind of thing.
- Multiply by your spouse's ownership percentage. Often 50%, but this varies by state, by prenup terms, and by how the rest of the marital estate is being divided.
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1. Cash on hand
The cleanest option if you have it, but few shop owners have this much liquidity sitting around without disrupting working capital.
2. Refinancing or a new loan against the equipment
Borrowing against the equipment's equity to raise the buyout cash. This works, but it adds new debt and a new payment on top of whatever you're already carrying.
3. Offsetting with other marital assets
Instead of paying cash, your spouse receives a larger share of other assets, home equity, retirement accounts, so no actual equipment payment changes hands.
4. Structured payments over time
Some settlements allow the buyout to be paid in installments rather than a lump sum, which can make an otherwise unaffordable number workable.
Where Buyouts Go Wrong
The most common mistake is agreeing to a number based on an inflated or outdated equipment value, then structuring a payment plan around it that strains the business for years. The second most common mistake is not accounting for the tax and financing costs of actually raising the buyout cash, which can add real expense on top of the settlement number itself.
What's Your Equipment Actually Worth Right Now?
Every buyout calculation starts here. Getting this number right, not too high, not too low, protects both sides of the negotiation. Valuation comes down to a few concrete factors:
- Brand and model. Haas, Mazak, Okuma, and DMG Mori hold resale value differently than lesser known import brands.
- Control vintage. A current generation control is worth meaningfully more than an older one on the same mechanical machine.
- Condition and hours of usage. Spindle hours, way wear, and maintenance history all move the number.
- Tooling and accessories included. Tombstones, vises, tool holders, and probing packages can add real dollars to what a buyer would pay.
What This Process Usually Looks Like
Get an independent valuation
Before agreeing to any number, know what the equipment is actually worth on the open market.
Build the net equity number
Subtract loan balances and estimated transaction costs from the fair market value.
Decide how to fund it
Cash, financing, asset offset, or structured payments, work through this with your attorney and, if needed, a financial advisor.
Formalize the terms
Get the buyout amount, payment structure, and timeline written into the settlement agreement.
FAQ
Is 50% always the split?
Not necessarily. It depends on your state's laws, whether assets are being divided evenly overall, and any prenuptial or postnuptial agreements. This is a question for your attorney.
Can I negotiate the buyout amount?
Often yes, especially if there's disagreement on the underlying valuation or how costs should be accounted for.
What if I can't afford the buyout at all?
This is common. Structured payments, refinancing, or offsetting with other assets are all ways to make an otherwise unaffordable number work.
Does the buyout amount get taxed?
Tax treatment varies by how the buyout is structured. This is worth a direct conversation with a tax professional before finalizing terms.
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