When Married Business Owners Divorce

Many family owned businesses exist in which married couples are the owners, about 3.7 million according to a 2007 Census Bureau report. That number combined with a high divorce rate of 50%, makes it important to plan for the possibility of the married co-owners seeking a divorce. Here are some tips for avoiding the end of a marriage from being the end of the business:

• Make an agreement and put it in writing. If a shareholder agreement is not already in place, which is unlikely, the separating couple should clearly lay out what will happen if one of them wishes to leave the business.
• Communicate with employees. It is important that employees are assured that the business will continue despite the change, and are encouraged not to take sides or feel personally involved.
• Keep personal and professional lives separate. It is easy for the personal aspect of the divorce process to spill into work life, but it is important that the couple keeps the two separate when making decisions.
• Create clear and well defined business roles. The end of the marriage can make a collaborate approach to management less productive, and new separate positions that split the business responsibilities may need to be created.
• Mediate it. Adding a neutral third-party in a confidential setting can help achieve a mutually beneficial agreement on how the business should be handled.

See Bruce Provda, Family Business and Divorce, Wealth Management, Dec. 15, 2014.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.