According to the US Census Bureau, more than 2.3 million businesses in the United States are jointly owned by married partners. And nearly 1 million of those are equally operated by both spouses.
If/when these spouses decide to get a divorce, they must decide what to do with their business. Normally, business assets are divided just like any other assets in a divorce. The majority of couples tend to have one partner buy the other out, sell the company to a third party, or simply close it.
For many, deciding what to do with a family business is just as traumatic as ending their marriage. This leads some people to question whether they really need to divide it all. They wonder if they can keep working together once the divorce papers are signed.
The key to making a decision is being willing to explore all available options. An attorney can help an owner conduct a proper and thorough valuation of the business and put that business in the context with all the other assets. This arms-length perspective is a valuable reality check that can help a spouse figure out the best path forward.
The couple themselves also needs to do some personal due diligence. They should not underestimate the challenges of working with an ex-spouse. Some questions they should ask themselves include:
- Whether they trust each other;
- Whether either one of them is an irreplaceable asset to the business;
- Whether they can be truly neutral as they continue running the business;
- Whether they can handle the emotional strain of working with a former spouse;
- Whether they can set new social boundaries (i.e. keep their personal lives separate from the business); and
- If one spouse is technically the boss, whether the other spouse is okay remaining that person’s subordinate in the workplace
If a couple decides to continue running a business together, an attorney can help them formalize this agreement. It may be helpful, for example, to create a buy-sell agreement in case one partner or the other ultimately decides to leave the business. An attorney can also help a couple reach a fair arrangement about how they will each interact with the business, what privileges and responsibilities each partner retains, and how to protect business assets in case one spouse or the other remarries or incurs a liability that could threaten the business.
In general, when couples choose to continue running a business together, it is because they do not wish to see their hard work dissolve or because the business is sufficiently lucrative. It is important to create sound agreements going forward that protect each partner and the business as a whole. Don’t hesitate to speak with an experienced attorney to keep your business safe and secure as you work through this difficult decision.