How you can protect your small business in divorce: Part II
In our last post, we began a discussion about divorce in the context of small business ownership. Although divorce can wreak havoc on a business owned by one spouse or co-owned by both, it is important to remember that this outcome is avoidable.
So how do you divorce-proof your business if you and your spouse are currently co-owners and co-managers? Well, there is always the option of continuing this arrangement even after divorce. But it goes without saying that this approach is not very popular. Instead, it often works best for one spouse to become the sole proprietor by buying out the other spouse’s interest.
Working with a family law attorney who understands the unique needs of business owners can make this process easier and more likely to result in a mutually favorable outcome. Your attorney may collaborate with an appraiser and other financial professionals to determine the market value of your business as well as its earning potential and other assets that may be harder to measure.
Once the valuation of your business is complete, your attorney can help you negotiate a buyout of your spouse’s share. If you cannot buy out your spouse immediately using other available assets, you may be able to set up a payment plan that relies on income from future business earnings.
The divorce rate in the U.S. is high and so is the failure rate of small businesses, particularly businesses that have only been around a short time. Even if your spouse is the co-owner of your company, the end of your marriage does not have to mean the end of your business. An experienced family law attorney can work with you to make sure that both the divorce and the transfer of business ownership go as smoothly as possible.
Source: The Business Journals, “How to divorce-proof your business,” Rosemary Frank, Mar. 2, 2014