Spouses can become co-owners of a business or professional practice in multiple ways. One spouse might have skills or a degree that allow them to work in a specialized field. The spouses might invest in starting a business together in the hopes of monetizing that education or those skills. One spouse does the specialized work, while the other provides support services.
Other times, the spouses might develop a business plan jointly that requires both of their skills and abilities. They might pool their income and savings to buy into a franchise opportunity or start a successful small restaurant. If the marriage falls apart but the business remains viable, the spouses who are also business partners may not know what to do next.
How do people navigate divorce proceedings when they share an interest in the business with their spouses?
A careful review is the first step
Spouses who start businesses together often include terms about buyouts or other potential future transitions in their partnership agreements. Spouses preparing for divorce typically need to review those documents along with financial records as they begin strategizing for the future.
They need to consider ownership of the business, employment and a fair way of sharing the business’s value. Factors including the level of conflict between the spouses and the role that each plays at the business can influence the best goals for the spouses to set.
Frequently, divorcing business partners need to determine who keeps the company and who moves on to seek employment elsewhere. Occasionally, spouses might determine that selling the business or the professional practice is the best option.
Other times, they could potentially attempt to retain joint ownership of the business after the divorce. Doing so typically requires careful planning. Spouses may need to create new contracts that address expectations regarding compensation and job performance, as well as what happens if either business partner decides to leave the company in the future.
Settling is often the best option
Technically, anyone preparing for divorce has the option of litigating and taking the matter through the family courts. However, they then rely on a judge’s discretion to make decisions about what happens with the business and any other assets they share. Those hoping to protect a business often need to look at their other options.
Spouses can work together to resolve property division matters, including plans for the future of the business. They can potentially move forward with an uncontested divorce. They get to set their own terms for divorce issues instead of waiting for a judge to decide what might be best for the family.
Business owners preparing for divorce often feel very anxious about how the change in their marital status could affect the value of the business and their professional success. Setting clear priorities and securing proper support may help business partners obtain a more favorable divorce outcome.