I was recently working with a couple going through a divorce and they were also working out what to do about the business they had set up together over the last 15 years.
Here is an article from The Wall Street Journal.
‘When entrepreneurial couples get divorced, there’s often at least one child that gets torn apart: the business they raised together.
Spouses who spent years building a company suddenly find themselves having to divide it up, and the negotiations can get nasty. One spouse may demand a bigger share of the company to soothe bad feelings from the divorce. Another may get defensive about the business’s finances and refuse to divulge details. And old resentments about how the business has been managed can bubble to the surface, making things even uglier.
Both spouses can be left emotionally drained, and the business can end up neglected—or dissolved entirely.
“The worst-case scenario is that you have to liquidate the business and split the proceeds,” says Catherine Stanton, an attorney and divorce mediator in Denver. “When we’re going through a divorce, we’re not always our best selves. If you’ve got a bad relationship with your spouse, they might not feel compelled to find another solution, and may go for the nuclear option.”
It doesn’t have to be this way.
Of course, it’s impossible to take bad feelings entirely out of the picture. But there are strategies spouses can use to ensure their business has a fighting chance to survive a split, as well as minimize their own emotional turmoil. In some cases, these methods can even help spouses run the business together—and thrive—after the divorce.
Here’s a look at what marriage experts and entrepreneurs say couples can do to keep a business together, even when the owners no longer are.
Start off as strangers
Perhaps the most important step couples can take comes right at the creation of the company: “If you’re starting a business with your spouse, treat it like you’re starting a business with a stranger,” says Ms. Stanton. “Nobody wants to think, ‘We’re starting this business together, let’s plan for getting a divorce.’ But I’ll be honest: Starting a business together ups the chances that you’re going to get divorced.”
Starting off as “strangers” means defining every aspect of the business beforehand—from who does what jobs to who gets what in a split. This can be incredibly tough, not just because most people don’t want to think about it but also because most couples run a business informally, negotiating who does what in the same way that they figure out who does the chores or picks the children up from school.
“Clear definition of roles within the business helps to avoid conflict when together,” says Matt Allen, a Babson College professor and director of the school’s Institute for Family Entrepreneurship. “If a divorce does occur, the clearly divided lines make it much easier for one of the two to step aside, and their role can be more easily filled by an employee/manager because there is a job description already in place.”
Dividing up jobs is one thing. Figuring out how to divide the company after the split is another. It can be painful, but experts agree there should be a plan in place to avoid conflict later. Even if couples think they’ll be able to keep working together after a divorce, there’s no guarantee they’ll be able to pull it off—especially because “frequently the tensions inherent in working together are what caused the marriage to collapse in the first place,” says consultant and author Wendy Jaffe.
It is best for one spouse to plan to buy the other out, experts say. “The upside of the ‘cash-out’ is the finality,” says Dale E. Johnson, a family-law attorney in Louisville, Colo. “I get the interest in the business, I go my way, and you get the cash.”
Click on the link to read the full article in The Wall Street Journal
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