How Will A Divorce Affect Your Small Business?

If you're a small business owner, you may consider your business to be somewhat similar to your own child. After all, you've nursed it from its infancy, supported it (financially and sometimes physically) through tough times, and cheered on its success. Therefore, it makes some sense that when divorcing, you may fight for "custody" of your business the same way you would fight for custody of a child. Read on to learn more about how small business ownership is valued and handled in divorce cases.

What are the possible outcomes of divorce with regard to your business?

There are several potential solutions that you and your ex-spouse (or a judge or mediator) may come up with to help equitably divide your business.

In some cases, you and your spouse may be able to continue on as joint business owners, dividing profits equitably and making management decisions together.

In other situations, you might be able to keep the business, but provide your spouse with additional assets (such as retirement accounts or home equity) to help balance the property division scales.

Finally, you may be forced to sell the business or a majority ownership in the business to help fund your financial settlement with your ex-spouse. If you and your ex-spouse are co-owners of the business, you may simply be able to find someone to purchase your ex-spouse's share of the business. If you are the sole owner, you may need to sell the business in order to garner enough cash to divide in the divorce settlement.

What factors will affect what may happen with your business?

If you and your ex-spouse have an amicable relationship and feel you are able to continue on as business partners (if not life partners), keeping the business might make the most financial sense. Assuming an amicable relationship, you should be able to agree on how to handle certain common conflicts (such as personal issues) and deal with problems calmly as they arise.

If you and your ex-spouse have a less amicable relationship, but are not co-owners of the business, you may be able to offer your ex-spouse additional money or property to allow you to retain ownership of business. This is a good option if you have substantial assets outside the business, or if the business is valued at such a low amount it does not need to be divided.

If you and your ex-spouse have a conflict-ridden relationship, and you cannot afford to "buy out" your ex-spouse's share of the business, your best option is to find another buyer who can step in as your partner. This can provide your ex-spouse with the money he or she needs to walk away, while ensuring that you can still retain some creative and financial control of your business.  

Talk with a divorce lawyer, like Allen & Rector, for help during your divorce.