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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