Tips for Managing or Dividing a Business After Divorce

Even in circumstances where there is little property to divide and the couple doesn’t have children, divorce can still be a complex and challenging event. At Hecht Family Law, we know that working together to develop parenting plans, custody agreements, or equitable property division can be challenging. For business owners going through a divorce, similar obstacles can arise related to managing or dividing the business, particularly if both spouses own the company.

Taking proactive steps to protect your interests can help support a more favorable outcome in cases where divorcing spouses own a business together.

Begin With a Business Valuation

Sound decisions during and after the divorce process should be rooted in facts rather than emotion, though it’s understandable that the latter will exist. That can be true with a co-owned business as it is with other aspects of divorce. Both spouses may feel emotionally tied to a business because they worked hard to found it or grow it over the years. However, it’s important to base decisions about how to manage or divide a company on business details rather than feelings.

Before you discuss what you want to do with the business, consider finding out what it might be worth. You can work with a business valuation professional to provide a third-party report about the value of the business, client lists, equipment, and other assets. This information can help you make more educated decisions through your divorce.

Determine Your Goal and Discuss it With the Other Person

After gathering all of the facts, consider your personal goals regarding the business. Be practical and realistic while also upholding some of your dreams and considerations about the future. Some questions to ask yourself include:

  • Is the business important enough to you that you would fight for it?
  • Are you willing and able to co-own and manage the business with your ex?
  • Do you think you are better positioned to run the business than your ex, or would the opposite be true?
  • Are you willing to trade something for the value, such as giving up a co-owned home in return for being able to keep the business?

These are just a few of the considerations you may need to factor in as you determine what your goal is regarding the business. Once you have a good idea of your own objectives, discuss them with your business partner and soon-to-be ex. Depending on the nature of the divorce—whether it is civil and cooperative or contentious—you may want to have other parties, such as your attorney, present.

Put Everything in Writing

You might decide to maintain co-ownership and run the business together. You could decide that you’ll maintain co-ownership and one person will be a silent partner. One of you might buy the other out, or you might sell the business to a third party and split the proceeds according to your divorce agreement. Many options exist, but no matter what you choose to do, ensure you put everything in writing.

Get Input From Experienced Third Parties

As you decide what to do with a shared business after divorce and implement those decisions, get input and help from experienced professionals. Some people you may want to work with during this process can include:

  • Accountants. CPAs or other professionals can ensure you have a strong understanding of your business’s value as well as its forecasted future value. They may also be able to help you and your ex untangle books and shared financial accounts if you decide to split the business or sell part of it.
  • Tax or business lawyers. Tax or business attorneys can ensure you take all the necessary steps for a business transfer or a business dissolution or termination, including filing notifications with the right agencies.
  • Divorce attorneys. A family law attorney can help you protect your interests and assets, including your ownership in a shared business, through the divorce process.
  • Real estate agents or business brokers. If you’re planning to sell a business or your stake in it, an agent experienced in commercial sales may be able to help you.

Be Honest and Transparent With Employees

Once you have a written agreement and a plan backed by the right professional support, you may want to communicate as much as possible to your employees. Being upfront about what is happening can reduce conjecture and panic that can be bad for production and the overall morale of your staff.

Consider Creating an External Communication Plan

Think about your customers and your general business brand. Depending on what you decide to do with your business, you may need to release an official statement. You might also want to have some scripts in place that employees can turn to if clients, business partners, or anyone else asks about your divorce, what will happen to the business, or any changes in ownership.

Start By Consulting a Divorce Lawyer

Your business is probably not the only thing you need to consider if your marriage is coming to an end. The right divorce attorney can help ensure you’re taking a big-picture, long-term approach to your divorce that sets you up for a better chance of success in the future. To talk to a knowledgeable divorce attorney about your needs, call Hecht Family Law today at 470-291-5342.