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Divorced Business Owners

Advice for Family Businesses

Divorced Business Owners

Getting divorced is tough if a couple owns a business together. We offer a few tips for married business owners to survive divorce.

It should come as no surprise that many businesses owned by married couples are threatened by divorce.

After all, divorce is a very common event these days. Divorce statistics are often touted in the media to be 50%, meaning that one out of two marriages will end in divorce. Experts say 50% is not the right number, but they agree that the divorce rate has been as high as 41% at times.

When a married couple that owns a business goes through divorce, it puts a massive strain on the business.

On the flip side, running a family business can put a massive strain on a marriage.

As if owning a business and being married were not stressful enough on their own. When you combine the two, you border on masochism.

When a couple that runs a business together opts for divorce, the business will either survive or die during the divorce process.

Given that the business might produce income for both husband and wife (soon to be ex-husband and ex-wife), the two parties should make an effort to keep the business intact and generating income or sell it for the maximum price.

In this article, we offer some tips on what to do if you own a business and are going through a divorce.

Surviving Divorce When a Married Couple Owns a Business

Given that you are getting divorced, you have four options to consider:

Continue to Work Together and Run the Business
Give the Business to One Spouse
Close the Business Down
Transition the Business to a New Business Owner

If the business is profitable, it would be a shame for the divorce to result in the business being closed down. So, avoid shutting down a profitable business at all costs. Even if the divorce is heated and tempers are flaring, both spouses should be rational about preserving the value of their shared assets.

The first option, continuing to work together and run the business, should be carefully considered. Ask yourself candidly: After this divorce is finalized, can I continue to see my ex- every day and work with him (or her) to run this business?

If the answer is no, then you need to immediately move on to the other two options that might make sense, either giving the business to one spouse or selling the business to a new owner.

If your answer is maybe, then it's probably worth giving it a try to continue to own and run the business as a divorced couple.

After all, you can always switch gears if it doesn't work out and jump to one of the other options, such as having one of the divorced spouses opt out of the business and cede control to the other spouse or selling the company to a new owner.

Running a Business As a Couple When You Are Divorced

The key to success for divorced couples that own a business is to separate business matters from personal matters.

The divorced business owners have to agree on a set of ground rules that will make running the business productive and not raise past issues that caused hurt and heartache.

Expect that these ground rules will change over time. Running a business as a divorced couple is not easy so both parties need to start the process by acknowledging that there will be bumps in the road. Start the new business relationship of running the business as a divorce couple with an attitude of empathy and patience. If you can do that, you will do well together.

When Divorced Couples Should Cut and Run on Joint Ownership of a Business

If running the business together doesn't work out after the divorce, you should move on to the other options. Usually, the divorcees know when it's not working out. Either the business if failing or the divorcees are failing, basically not enjoying life in the new mode of being business partners while divorced.

In this case, it's time to sell the business. Either one divorcee should buy the other out, or the firm should be brought to a business broker and packaged up for sale to the highest bidder. Many business brokers have experience selling businesses due to divorces. Make sure you find a business broker who understands the unique aspects of selling a business if you are divorced.

It would be interesting to know what percentage of businesses owned by a couple that gets divorced survive and which of the "business ownership meets divorce" options above are most common.

Those statistics are not available but if you are going through the process or have been through the process, or know something about this topic, please do leave a comment below.

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Do you own a business with your wife or husband and ow you are getting divorced? How's it going? What advice do you have to share with married couples who own businesses but are getting divorced?

Olivia posted on 6/9/2010

This article just confirms the obvious. I looked up the phrase because I'm in that very treacherous decision making time now -- I am a married business owner who may end up getting a divorce. My husband and I started the business 13 years ago, been married for 20 years now. I'd advise that couples exercise caution when deciding to work together. Have strict rules concerning boundaries as far as work and home are concerned. Don't bring work home or home issues to work. Things worked relatively well for us as far as work was concerned but now that our personal lives are in a shamble, we've neglected the business and are trying to recover. Debt is high, tempers are flaring, and it's taken almost two years to try and keep ourselves work orientated. Catch 22 situation all the way. I stay and he stays..tension. I leave and he keeps the business..he can't pay me out right now. I feel indebted to stay and get things on track but desperately need to leave. Selling is not an option so the plan is that he keeps the business and pays out my share, when the business is out of the red. I may not have great advice but I hope it helps some of you. I've just been through one huge painful emotional mess and now just trying and move forward with empathy, humility and an optimistic outlook on life, one day at a time. Good luck to other married couples who own businesses and are working through these tough challenges!
Gwen posted on 7/8/2010

My husband started a LLC business with a partner 50/50. It was started on the fly and there is no operating agreement. These two know the technical side to the business (auto body shop) but have absolutely no business sense. I got on board to protect and support the business. I went to work for the company before the day we opened, but the partnership was formed before I got on board. I took no pay until 8 months after opening the doors. I am now an underpaid "employee" of the company and have been receiving just enough pay to help offset our household expenses. I do all the books, banking, A/P, A/R, taxes, payroll, insurance, HR...basically everything to do with the office except order parts and get any controlling voice in the day to day operations. I make a lot of decisions without any benefit of partnership. My husband and I are now separated and am at a crossroads as to how to go about figuring out my share (if any) of this company. I see a lot of potential in this business and would like to be a part of it if possible, but only if these two knuckleheads can get reeled in.....a fairly tall order. I know that I am not irreplaceable, but in order to replace me, they are going to have to hire (and at an increased salary) someone who will not have the vested interest in this business that I do. My soon to be ex has told me and his partner that he will be unable to work with me in the future. This is a viable business with me watching these two and counting the pennies....but I am afraid that if I am fired (which is what they are talking of doing) I will be without an income and or business. Everyone says, you need to talk to an attorney......but what kind? Attorneys seem more interested in taking my money than protecting me and my children. Any help, please? Any chat rooms to go to for advice? Anything?
Dale posted on 11/27/2010

Thank you for posting advice and success tips for divorced biz owners. My situation is a little different I think. #1 our business is an sCorp and I'm 100% owner, there's NO 50/50 in my corporate articles on file with the IRS. So my question is, if I decide to get a divorce, is my spouse entitled to anything to do with my biz? By the way I've shown a NET LOSS every year for 9yrs going in my tax records. She has been on the payroll part-time for 2-3 years and is now if that matters. Thanks again!