08 Jun Divorce and the Family Business
Divorce is never uncomplicated or easy. However, when a family owned business is involved divorce can become even more complex. Even simply one spouse owning a business can add stress to a marriage, and when going into business with a spouse or an in-law it is incredibly important to have a plan for the possibility of divorce. As such individuals should consider putting in place the following items when going into business:
1. Have a Buy-Sell Agreement.
This Agreement details what will happen to the company in the event of a divorce, and this agreement should place the interests of the business above the interests of the individual owners. This will provide a framework regarding who will take the company ownership and, more importantly, how the company will be valued. Assigning a valuation method from the outset can prevent a great deal of litigation over what value should be given to the company.
2. Define roles and responsibilities.
Clear delineation of job duties can draw a road map of who is responsible for what tasks and can help avoid micromanaging of one another. Defining roles and responsibilities can eliminate too much constant collaboration and allow for some space between family members on the day-to-day operations.
3. Separate personal and professional.
Period. The more one can compartmentalize personal and professional lives the easier it will be on everyone and the easier it will be to untangle things in the event of a divorce.
4. Communicate with employees.
Business owners should always communicate to their employees as much information as is possible regarding the plan for the business in the event of divorce and ensure them that adequate steps have been taken since the formation of the company to put the company first. This is certainly something that owners should take into consideration even without divorce at play, but definitely a step needed if divorce takes place in the family.
All in all, plans should be made prior to beginning a business on how to get out of the business under the best and worst case scenarios. In the event of a divorce, mediation can also be a positive alternative to full litigation regarding issues that may arise affecting the company.
Please contact us to schedule a consultation with one of our business law attorneys to discuss specific plans that may be made to protect your business venture today for the future.