Facing a Divorce? Here’s How to Protect Your Family Business

Settling Divorce PapersBusiness ownership entails monitoring risk variables, including new competitors or changes in supply costs. It’s rare, however, to see one’s spouse and supposed business partner as a possible threat to the stability of the business.

The reality, however, is that it can happen. Statistics show that half of first marriages end in a divorce with the probability increasing for second marriages. For couples who co-own a business, a divorce can jeopardize the business.

Divorce lawyers, however, can help straighten out this matter. Here are some situations where a divorce can threaten the family business, as well as possible ways to approach the situation.

Create a Prenup

For couples starting the business before tying the knot, a prenuptial agreement is essential. This contract has nothing to do with trust or the level of love you have for each other. It is a concrete agreement that determines what happens to the company in the event of a divorce. As the state requires that it can’t be “unconscionable,” it eliminates the likelihood of a single spouse getting all the rights to the company.

Continue to be Co-owners

The simplest way to help the business get through the divorce intact is to create a structure that allows spouses to stay as co-owners, even after the divorce. This option, however, is only feasible for those who had an amicable separation and are no longer locked in a legal or emotional combat. It also pays to have a shareholder agreement that awards either spouse the ability to buy the other out at a price that’s mutually agreeable.

As couples tend to have both their net worths tied to the business, they are usually left without an option to buy out the other. This may mean that the enterprise must take on a heavy debt load or, at worst, go on the market. An amicable agreement, or even one that is mediated by a professional, however, can help prevent these scenarios from taking place.

READ  Before Marriage: The Importance of Prenuptial Agreements