Managing a business throughout a divorce can be a complex and emotionally trying experience. Divorce can leave family-owned businesses vulnerable to a number of serious consequences, including dissolution. While no one plans on divorce, it is usually reported that approximately 50 percent of marriages in the United States end in divorce. That is just one reason why it is so important for couples with family-owned business to plan for the possibility it may occur.
Minnesota small business owners know how much time and planning goes into a business. In fact, most companies have all manner of contingency plans should something occur; yet they leave themselves exposed to risks associated with a rather common event. This does not have to be the case, however. In fact, there are many ways for companies and families to plan for the possibility of a divorce, and to protect their business assets in the process.
One way for families to preemptively address many of the conflicts that arise in a divorce is to embrace the partnership agreement. Spouses can use a partnership agreement to detail what will happen if the couple decides to split. This can include everything from selling the business and dividing the company's assets, to terms for buying out the other's interest. It is also a good idea to revisit the partnership agreement once the divorce is finalized as well.
Another way for couples to protect family-owned businesses in a divorce is to enter into a prenuptial agreement. A prenuptial agreement allows parties to establish important property and financial rights concerning the business. In addition to establishing positive rights, such as who will get the printer and who will take the desk, a prenuptial agreement can be used to assign debts so one spouse does not become liable for the financial choices of the other.
Source: Grand Rapids Business Journal, "Can you 'divorce proof' your family-owned business?," Paul A. McCarthy, May 3, 2013
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