Business owners often make years of personal sacrifices and significant investments in the organizations they operate. A business may be a source of personal pride and can provide a regular source of income.
The company could be vulnerable if the owner decides to divorce. It is therefore important for business owners to take appropriate protective measures as they prepare for the end of a marriage. There are several challenges that business owners may need to prepare to address if they want to protect their business and ensure the best possible standard of living after their divorce.
Retaining the business
Those who own and operate companies may naturally worry about the possibility of the courts ordering the liquidation of the company or extending joint ownership to the other spouse in a divorce scenario. Business owners may need to plan to protect the company. They need to conduct a valuation and go over financial records to help protect the business and develop a strategy. They may need to identify ways that they can offset the business’s value and compromise with their spouse during the property division process.
Working with a spouse
It is common practice for multiple family members to work at the family business. Such arrangements may mean the spouse hoping to retain ownership of the business needs to plan for the other spouse to transition out of their current position at the company. Other times, they may believe that they can continue working with their spouse, but they may need to renegotiate contracts to prevent conflict and the possibility of future litigation.
Addressing financial support
Business ownership can make it relatively difficult for people to appropriately evaluate financial support obligations. The other spouse might accuse the business owner of intentionally diminishing revenue to limit child support and alimony/spousal support obligations. Irregular or unpredictable income can make calculating financial support obligations difficult as well. In some cases, the valuation method used to determine what the company is worth might make requests for spousal support or alimony unfair, as the process may have factored in the same business revenue more than once.
Business owners often need help protecting themselves and the organizations that they operate as they prepare for divorce, and that’s okay. Recognizing that there are serious challenges that may arise can help business owners push for an outcome that preserves the company.