You’ve spent years and thousands of dollars building a family business to provide security for your family. You’ve sacrificed countless hours, holidays, and sleepless nights. Finally the business looks like it’s going to take off, but now you’re contemplating divorce. What’s going to happen to the business you’ve worked so hard to build? Are you going to have to pay more in legal fees than the business is worth? Should you just walk away from your business when you dissolve your marriage?
Family businesses present special problems in divorce. Frequently the family-owned business is the largest single asset the parties own. Small family-owned businesses, particularly service businesses, are notoriously difficult to value because no ready market exists in which to sell many family owned businesses. If the business cannot be sold, it can be difficult at best to run a profitable business if ex-spouses must be involved together in daily operations or an ex spouse is a major shareholder.
In litigated divorce involving family businesses, the court typically opts for a “clean” solution, awarding the family business to one party and compensating–or not compensating–the other spouse for his or her portion of the business. But this solution isn’t appropriate for all families or all businesses.
Fortunately, if the parties choose a Collaborative Divorce, they can explore creative and unusual solutions to this delicate problem. For example, I have been involved in several cases in which the parties entered into an operating agreement for the business so that they could both work in the business and have time to develop an exit strategy. In other cases, the parties owned real estate together and developed a plan in which they continued jointly to hold the real estate and established a future timeline for selling the properties and dividing the proceeds. In still other cases, one party chose to take the business as his or her only asset, while the spouse took all other marital assets or agreed on a payment plan for his or her share.
These successful collaborative cases have one thing in common: a divorcing couple that was willing to work hard, to “think outside the box,” to trust each other and to commit to an ongoing solution for the business, despite the dissolution of their marriage.
These cases are real-life examples of my point: if you’re a small business owner contemplating a divorce, don’t panic. Your family can survive this divorce. So can your business.