When married business partners head for divorce, everybody has questions. “What will happen to the family business? Who will run it? Can we both still participate?”
As San Bernardino divorce lawyers, we’ve seen several cases where couples headed for Splitsville need to hash out the details of their family businesses. Sometimes everything is clear-cut because of a prenuptial agreement that’s already in place. However, if the business was started during the marriage, there can be complex negotiations that need to take place.
Family Businesses and Divorce: The Numbers
More than a million married couples run businesses together in the U.S. alone. Given the number of divorces that take place each year, it’s safe to say that a significant number of those couples won’t see their next anniversary.
During divorce, many people choose to wash their hands of the family business, and they do so for myriad reasons; often, though, it’s to avoid future headaches and hassles. In some cases, one soon-to-be former spouse will buy out the other spouse, resulting in a lump sum of cash that can be used for anything.
Before you make any decisions, talk to your lawyer. You may have more options than you think you do.
Walking Away from the Family Business
Your attorney will probably suggest that you figure out exactly how much your business is worth (through an actual business valuation) before you decide to walk away. Once you have a figure, you and your spouse will be able to make an informed choice about whether one, both or neither of you hang on to the business.
Sometimes it’s feasible for couples to split their business in two and each operate their own half; a pair of doctors, for example, might open separate practices.
Do You Have a Legal Right to Keep Your Business?
California law is clear that property acquired during a marriage is subject to fair and equal distribution. That means the question isn’t necessarily whether you have the right to hold on to your share of the business; it’s whether you want to hold on to it.
Creating a Working Partnership
Some couples choose to continue working together after they’ve divorced, and sometimes it actually works out for the best. What’s important is that you and your ex agree on the terms—you can do that with your divorce lawyer’s help—before you make anything official.