When a Breakup Includes a Business

Posted by Cameron Heron on June 27, 2011 Leave a comment (0) Go to comments

Every couple getting a divorce has financial issues they need to consider, but for couples who own a business together, financial matters loom large and can drag out the divorce process. According to the National Federation of Independent Business, there are more than 1 million husband-wife teams operating businesses in the U.S. When one of those couples gets divorced they must consider:

How to properly value the business
Whether to keep or sell the business
Whether they can continue managing the business together, and if so, how to structure that partnership to minimize conflict
How to protect the assets of an ongoing business, particularly if the couple is near retirement
Dividing the assets of a business while protecting money needed for retirement

SmartMoney reports that the downturn in the economy has made it significantly harder to sell a business. Only about 30 percent of small businesses on the market will sell. This can mean that couples who would have preferred to sell the business and split the proceeds may have a long wait to reach that goal, or may need to consider other options.

With banks tightening credit and less access to capital in general, it can be harder for one partner to buy the other partner out of their share of the business if they have to borrow to do so.

This may mean that more and more couples end their personal relationship but not their business relationship. They need to find ways to work together. A family business consultant told SmartMoney that it can be helpful for some couples to create a board of directors to help them keep business decisions focused on business, rather than personal grudges.

It may be that the vision, the persistence and the creativity that allowed these couples to build a flourishing business in the first place will be what’s needed to arrive at the other side of divorce in the best financial shape possible.