No one goes into a marriage expecting it to end in a divorce. But a lot of things can happen in the future that may lead to the unexpected. Forty-eight percent of married couples break up after 20 years. Although some couples try to make things work, most of the time, it ends up in divorce. Divorce is already a difficult process, especially if there are kids involved. The separation process might get even more problematic when you own a business together. So, what do you do when this happens to you?
Do a formal business appraisal
Before you decide what happens to your business after the divorce, make sure to get the business appraised. Having the business go under a formal valuation will help you identify exactly how much the business is worth. Do take note that the auditor you hire to conduct the appraisal must be neutral. This will help avoid any further conflict that may come up during the process of the divorce.
Get advice from your attorney
It is always a good idea to seek assistance from your attorney. If you have not yet begun the divorce process, go online and check a website like matthewsfamilylawyers.com to find an attorney that will help you through the process. Your attorney will not only help with the divorce itself but everything involved in the process. That includes giving you advice on what action is best to take when it comes to the family business. They will help you with issues related to tax, licenses, and permits, as well as ownership transfers.
Decide what happens to the business
There are only three outcomes when it comes to dividing a business during a divorce:
Some may think that joint ownership is the best course of action. It’s straightforward and seems to be less of a hassle than deciding who gets to be the sole owner. But owning a business together with your ex-partner is easier said than done. Of course, joint ownership with your ex is possible, but it definitely isn’t the solution for everyone. For some people, they choose to keep working together because they already know how their partner works. It’s cases like these when they realize they’re best as business partners but not much as a married couple. If you are thinking of keeping the business together, here is some advice you should keep in mind: Boundaries are important.
You have to learn how to separate your business from your personal life. More conflicts arise when partners don’t know how to untangle their personal lives from their business. It would also be good if you both took a break before working together again. Give your ex-partner some time to cool off and move on from what just happened before coming back to work with you. Having your roles and responsibilities clearly defined is also a great way to set boundaries. Identify each other’s skill set and work with that. ;
Buying out your ex
If you aren’t keen on the idea of sharing the business with your ex-partner, you can always opt to buy out the business from them, or vice versa. If you have enough capital, you could opt to buy out the company immediately. But if you don’t have enough money to do so, you can come up with a settlement note to be paid overtime.
Selling to a third party
If neither of you holds any emotional connection to the business, you might want to sell it to a third party instead. This might be the easiest option since you both split the proceeds equally, and you can go your separate ways after. You could even use the money to start your own business. The only problem with this option is that it can take a while before you sell the business. That means the divorce process will also take a while.
There is no single approach that is right for everyone. One option may be more appropriate for one couple and the other not. It all depends on you and your ex-partner. You could have your attorneys assist you in making the decision as well.
If you are thinking about starting a new business or if you are now the sole owner of this business. You may want to start taking steps to protect your business from a divorce in case you plan to get remarried. This way, you avoid making the same mistakes as last time. Signing a prenup saying that the business is a separate property owned by you alone is one way to do it. Putting the business in a trust is also another way to do it.