Couples who sail along happily married don’t always think about what could happen if their relationship deteriorates, and they decide to get a divorce. However, even blissfully-married business owners need to take protective steps just in case.
We usually think about the potentially harmful aspects of divorce from a personal perspective – both financially and emotionally. But putting protections in place while a relationship remains strong can be essential for your company’s long-term survival.
What are the potential business impacts of divorce?
Divorce can affect a company in many ways, including:
- Disruption: You may have to schedule court hearings, meetings with lawyers and address vital issues related to the divorce, which can affect a company’s day-to-day operations.
- Partners and employees: If all or a portion of your company is a marital asset subject to division, how will this affect a business partner or those who work for you?
- The business’s future: Will the company’s value be affected by a divorce settlement? Will you have to sell or close the business to pay your spouse the amount he or she is entitled to receive?
Take positive actions to avoid negative impacts
There are ways to prevent or mitigate risks, such as:
- Drafting a prenuptial or postnuptial agreement: Clarify whether the business is subject to division if a divorce happens, how the business will be valued and whether one spouse will be bought out, paid a specified lump sum or whether the business will be sold.
- Maintaining immaculate records: Have a detailed accounting of all sources of capital and whether that came from premarital or marital funds, document all transactions, keep business and personal expenses separate and pay yourself and your spouse a fair market salary if both work at the company.
Good planning minimizes disruptions
If a divorce is inevitable, take steps to reduce the impact to the company and employees. Keep work and divorce activities separate, use only personal email for divorce-related correspondence and refrain from discussing these private matters with people at the office.
Become a scheduling master and work with an experienced family law attorney to set aside time for phone calls, emails and other divorce matters and draft a comprehensive list of items containing the information you need from company records, so you only need to approach employees once. Taking these steps can help keep any potential damage to a minimum.