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Family Owned Businesses and Divorce

Posted on in Divorce
Going through a divorce means coming to an agreement (or at least trying to) on issues with someone that you may not agree with on anything – hence the divorce. Working out plans for custody, property, assets, can be difficult and challenging. But what happens when one of the issues on the table to work out is a family owned business? How do divorcing spouses who share and work together at a jointly owned business avoid going out of business? An article in Craine’s Cleveland Business offers advice on what steps couples can take to ensure that the family’s source of income can survive where the marriage did not. Ideally, the best course of action would be for spouse to buy the other spouse’s share of the business. However, that’s not always financially possible and the estranged couple As is the case with many financial issues in a marriage, having a prenuptial agreement in place is one way to protect the family’s assets. That not only goes for the owners of the business, but it’s also advised that adult children who may receive stock in the company also have a prenuptial agreement with their future spouses. A prenuptial agreement should provide for mandatory buyback of ownership in the event of a divorce by using a discounted valuation. It can also offer extended payment terms in order to preserve the business and protect its assets. So how do you divide the wealth of the business without dividing the business itself? If there are adult children working the business who will be the designated successors someday, then Craine’s recommends is to give part or all of the business to them now. Trying to not let the emotion of the divorce affect your business sense can be difficult. If you are a business owner and are considering a divorce, consult with an experienced divorce attorney to help make sure you’re protected.
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