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Can Your Small Business Handle a Divorce?

Dave Thomas

October 05, 2012

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For couples that find their relationship going south, those problems can be made even more difficult when the two are connected to a small business.

Whether they own the company together or one works for the other, a personal parting of the ways can have a significant impact on the business one or both built. In some cases, the small business can even collapse under the ensuing fight that can lead to the courts.

If you think this scenario is very uncommon, stop and think about the fact that there are countless couples out there who have some union when it comes to one or the other’s business. Whether one party had a business and the other joined them after marriage, the two both put time, money and effort into it and then got married, or one inherited a small business from a family member and the other then helped run it, the situations can vary.

The National Federation of Independent Business reported that there are more than a million husband-and-wife teams in charge of businesses across the country. With that being the case, what may have been a simple divorce can turn into a harrowing experience for each person’s divorce lawyer.

While there are different business ownership scenarios that can play out when a husband and wife decide it is time to part company, several of the most common are:

1. One of the two parties could offer to buy out the other one. While this can come at a significant cost, it also provides the purchaser with majority control in the business. In some cases, the man or woman selling may still want a portion of ownership in the company, but they would not be able to make executive decisions. This may work for couples that have an amicable divorce, but obviously not in many cases where there is disharmony in the split;

2. Remaining in business together is always an option. There are instances where despite the divorce, the two parties put aside their personal differences for the betterment of the business. In the event the business has been doing well and has remained profitable, it would certainly make sense even in a divorce to try and keep the business going as a team. Remember, you don’t have to love the other individual, but it may make good business sense to at least remain on friendly terms with them;

3. Another option that oftentimes results from both parties being unable to accept working together is putting the business up for sale. While this may be a last resort, the money from such a sale may be needed by one or both parties. In this scenario, lawyers will undoubtedly get involved to carve up who gets what. It is important before agreeing to sell the company that you think long and hard about all the time and effort that went into the business in the first place.

As a small business owner, have you ever found yourself in this position? If so, what was the outcome?

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