We tend to separate our personal life from our business one. However, what can happen if our partner in business is also our partner in life and one day we decide to split up?
This is a specially delicate matter you’ll need to look into even before tying the knot. However, if you did not do so, or you were two in love to be a bit more practical, or you started the business later in your marriage, here are 3 ways that a divorce can impact your business, according to Forbes:
1. Disrupting day-to-day operations.
Divorce has a way of not letting us move as usual with out lives
Suddenly you need to fit court appearances into your schedule, you may have to accommodate calls or correspondence with your matrimonial and family law attorney or business appraiser during the workday, and you need to comply with requests for documentation about your company— which can be time-consuming, distracting demands.
It may also distract the employees from your business. You’ll need help gathering your business documentation, review inventories, etc. They might even need to do a few interviews on how the business is run. All that joined to the stress of having to work with the two owning parties that are not in the best of terms (no matter how “amicable” your divorce is).
2. Potential impact on your partners and/or employees.
If you intend to divide your business for divorce, you need to choose how you will do so. Will pay your spouse out in stock? This might be a problem you might share with your partners.
Also, how much of the conflict are your employees going to have to face? There are many kinds of business and I know that, in some cases, both spouses can play a very important role in the business. Can you both coexist working together? Will you have to hire someone else and figure out all the activities done by your spouse?
Think of it this way: your business might be yet another child you’ll both need to co-parent and try to communicate as much and as cordially as you can. The good news is that you can leave it if it ever becomes too hard to do.
3. Dissolving the business altogether.
This is the worst-case scenario and it’s not really common. But its one that may seem easier if you and your spouse are equal partners and it’s convenient for both. But it’s not the only scenario:
If your spouse is entitled to a big cash payout for his or her share of the value of your business and you don’t have the liquidity, you may be forced to sell or close the business in order to pay your spouse. Another scenario could include a culmination of negative events: disruptions to your operations and team resulting in poor communication with customers and business partners, bad press that damages your brand reputation and discourages people from doing business with you, etc.
Can I prevent this from happening?
The good news is that you can always prevent this from happening. If you are not yet married, you can set everything straight through a prenup. And if you are already married, you can do a post-nuptial agreement.
Here are some of the things to look into for your business, according to Forbes:
- Whether the business you established prior to your marriage will not be subject to marital distribution upon divorce – even if you may be actively working for the business during the marriage
- Whether your spouse will share in the appreciation or depreciation of your pre-marital business during the marriage
- By which methodology the business would be valued at the time of divorce
- In the case of both spouses having an ownership interest during the marriage, would one spouse buy the other out in the case of divorce, would the business be sold and the proceeds distributed or would you maintain the business partnership in spite of the dissolution of the marital partnership?
Also, there are day to day managing strategies that will help you prevent any trouble:
- Maintaining detailed records of all sources of business capital, and whether they were premarital or marital funds
- Keeping your business and personal expenses separate
- Making sure any cash transactions are well-documented
- Paying yourself a fair market salary so that a court will not be inclined to impute a larger income figure to you for purposes of determining support obligations
- Paying your spouse a fair market salary, if he or she works at your business, so that there is no question as to whether he or she should receive a larger distribution given the contribution of services
If Divorce cannot be prevented, you can take the following steps to make it as little disruptive as possible:
- Keep work and divorce activities separate, including maintaining one master file on your computer or laptop for divorce-related items, using only your personal email for divorce correspondence, and limiting any discussion of your divorce with employees and peers
- Become a master scheduler, including designating a time slot each day for divorce calls and correspondence with your attorney or other contacts
- Minimize the burden on employees by providing those who help you collect documents with a single list of required materials