In a previous article, we discussed the factors involved and actions you can take in pursuing a divorce as a business owner. However, what should you do to prepare when your partner in marriage is also your partner in business? Divorce–an already complex process–becomes an even more complicated subject for you, your partner, your legal team, and the Court (when applicable) to navigate when a business is involved. In this article, we’ll look at how you can divide property in divorce as a business owner.
Decide How to Divide or Share the Business
Simple divorce cases usually take several months to resolve, so you can expect a complex divorce involving a co-owned business to take longer. If you and your partner don’t have an arrangement in mind to manage your business during that time, you risk the company become lost in the mix which could have very serious consequences. So, determining how you’ll proceed with the business and your divorce should be one of your highest priorities. Here are a few arrangements to consider.
Continue Operating the Business As-Is
While it’s always possible, continuing to act as business partners can be exceedingly difficult in the middle of a divorce. If you and your spouse are discussing how to continue operating as partners for the sake of your business, you’re on the right path. You’ll need to be completely honest and transparent with both yourselves and each other to determine your working relationship after divorce. You’ll need to consider which roles each will play, how much overlap your departments/work will have, and if you’ll retain your current shares as-is or change your arrangement. During your divorce, both of you will need to create a more structured contractual relationship than you had during your marriage since you’ll likely be communicating less.
One Partner Leaving the Business to the Other
Throughout the process, you’ll often discuss how to divide property in divorce and what will go to each spouse depending upon the various factors involved. If either of you decide you’d like out of the business because of the dissolution of your marriage, it is typically possible that one partner can be “bought out” through the exchange of marital property for the other’s interest or shares in the business. In this scenario, your legal team will decide if there is enough marital property to fulfill this arrangement or if a percentage of profits or installment payments will need to be offered instead.
Both Partners Decide on Selling the Business
If a buy out isn’t possible or the divorce has led both of you to no longer want involvement in the business you managed together, then selling the business is always an option. In choosing this, you can arrange to divide the profits from the sale and add these terms to your property settlement agreement. However, if you and your partner can’t reach an agreement, even with the help of mediators and attorneys on both sides, the Court itself may decide to order the sale of the business and divide the proceeds in the most practical manner possible, which may not be an ideal solution for either of you.
Some businesses simply do not have value, or much value, in the assets of the business itself such that it can be easily sold or divided. This is often the case where the business is one of skilled trades and the only assets of the business are the tools of trade. In these cases, it may make more sense to allow one spouse to keep and operate the business without the other for an exchange of property or debt elsewhere in the divorce.
Other Things to Consider in Divorce as a Business Owner
Whether you and your partner have chosen how to proceed with your business or not, there are a number of factors that could easily change your situation if not considered. These factors include:
- How you originally structured your business
- Whether one party owned the business prior to the marriage
- Whether the business can exist without one or the other partner
- Whether one of you holds the majority of the interest in the business
- If there are any other business co-owners outside of you and your partner
- Whether the business is discussed in your prenuptial agreement
- Whether you have a buy-sell agreement in place
If you’ve arrived at a decision on the business in relation to your divorce and failed to consider one of these factors, you could quickly reach a point where your decision needs to be reconsidered or reversed entirely to protect your assets in divorce.
When you and your partner are ready to start separating your business and filing the divorce paperwork, contact the Law Office of Dorene A. Kuffer to connect with a thorough and knowledgeable divorce attorney. Our skilled lawyers have experience in working with business owners and entrepreneurs, so we are ready to ensure you protect your assets in divorce and reach the best possible outcome for you and your interest in the business. Connect with Kuffer Law today.