Divorce & Your Family Business
Divorce entails the loss of more than future family goals and material things. Divorce can affect your professional life as well. Couples involved in a family business find themselves battling over the division of assets and labor that threaten the security of all involved. If you are divorcing and you own a business with your spouse, keep reading.
Couples invest their lives in a family business, and unless there was a prenup, dividing the years, time, and sacrifices invested by both parties (in and outside of the business) is a challenge. First, it’s important to know that in Arkansas you live in an Equitable Division State. This means Arkansas takes into account the length of your marriage and the involvement each spouse had in building and running the family business. When you are settling on what is your personal property and what is marital property, this is important to know.
The easiest solution, and the least likely one, is for spouses to part ways in the romantic arena but stay co-owners and run the business together. A few couples could manage this, but usually the emotions involved in the divorce prevent such a success.
Another option is to buyout the business from your former spouse. This can be expensive and add debt, but if the worth of the business is assessed and both co-owners are open to the idea, it’s still an option.
Finances are already a hassle in divorce, but when family is involved, taking on more debt might be necessary. Loans can make a buyout feasible. You could take out a loan to give the partner leaving the business their monetary share, since most of the value is actually tied up in the business and it isn’t a load of cash in a briefcase somewhere. Another choice is a property-settlement note. This is a long-term loan to payout the the amount owed to your former partner--with interest. These options are not ideal, but they do offer you the path of keeping your business intact.
Add a partner. This spreads the money and responsibility around and also allows for the business to stay a viable option. If this takes place, look into legal safeguards for the future of the business.
The last solution, and remember that Arkansas can help make this a fair one, is to sell the family business. By taking into account all the time, money, labor, and ideas each spouse invested in the creation and maintenance of the business, each spouse can come away with what they deserve.
Selling might feel like giving up on the dream, but it doesn't mean your business ventures are over. A family business is just that--part of your family. Hopefully, you can carry on with your former spouse and run the business together even after the marriage is dissolved. If not, be sure you know your legal rights. This will help you plan for your life after divorce. It’s about to get better, and we are here to help.