A successful business can offer many forms of support to a family. One or more of the adults and possibly even the children in the family might work for the business or professional practice. The company can provide income and access to employment benefits.
Working together can promote strong family bonds. Unfortunately, a successful company can also be a source of stress and conflict if the owner divorces. Business owners may face several unique challenges during divorces, including the three common concerns that business owners often need to address early in the divorce process.
1. Can the spouses work together?
Maybe the spouses met during graduate school, and they now both work as licensed professionals at the same business that they built together. Neither may want to leave the company or professional practice to seek employment elsewhere or begin building a new company of their own.
Spouses may need to negotiate thorough agreements that allow them to continue working together during and after the divorce. Similar steps may be necessary if one spouse holds an executive role and the other spouse handles administrative matters for the family business. Some couples can continue working together, but the vast majority of coworker spouses must plan to facilitate one spouse’s exit from the company.
2. What is the company worth?
Shared ownership creates a variety of complications after a divorce. Frequently, one spouse retains their interest in the company, while the other must give up their interest in the business. To reach a fair property division settlement, the spouses must determine what the company is worth using one of several valuation methods.
They must also negotiate arrangements for integrating the company’s value into the overall property division settlement. The owner could refinance to withdraw equity from the business. They could also agree to take responsibility for more marital debt or give up their interest in other valuable assets, such as retirement savings, investment accounts or real property.
3. Are trade secrets at risk?
Many successful businesses and professional practices have unique goods or services that set them apart from competitors. Business owners expecting to buy out their spouses may need to address trade secrets and negotiate contracts that prevent their spouses from exposing company information or directly competing against the business in the future.
Establishing priorities early in the divorce process can help business owners protect their organizations and minimize the stress and uncertainty of their divorce proceedings. Business owners trying to determine what their companies are worth and how to effectively protect their holdings usually require assistance, and that’s okay. Seeking personalized legal guidance is always an option.