small business divorce
Divorce and small business

Couples running small businesses together are oftentimes faced with big decisions as to how best position the company for success.

What happens, however, when the couple decides that it is time to end their personal relationship and divorce becomes a reality and not a possibility?

For many couples, being both husband and wife and business partners can be challenging. That challenge is increased several times over when a divorce works its way into the business relationship.

Couples Could Deal with Financial Split Too

According to information from the National Federation of Independent Business, there are more than 1 million husband-and-wife partnerships running businesses nationwide. When divorce becomes a reality, the couple, their legal representation and even the judge can have a tough time sorting through all the material.

For those not aware, the nation’s divorce law is centered on the idea of marital property, whereby, anything acquired during the matrimony is in all likelihood consider marital property.

In the event the husband or wife was running the business and the partner was at home raising kids or working elsewhere, it does not matter. The law will look at this scenario as the partner not inside the business still in some manner contributed to its success. That being the case, the person more removed from the business is still entitled to their fair share of the company, oftentimes half.

In instances where one individual had the business prior to the marriage, but kept it during the married relationship, any increase in revenue during the couple’s time together is viewed as marital property.

So what are some of the possibilities that can come out of a divorce involving business partners? Among the three most common are:

  • Buyouts – While some divorced couples do continue working together, many find it not doable. If that is the case in your situation, would you consider a buyout of your business partner? An accountant can help provide you with the financial details of such a decision, whether in fact it will all be done at once or over time. Remember, however, losing one of the partners could have a major impact on the business, so think it through;
  • Staying in business together – While this one may not be at the top of your choice list, it can prove amicable in some instances. Given the fact you are not likely a very rich and large corporation, it doesn’t mean you cannot put in place a board of directors for the business. By doing so, you get an unbiased opinion (hopefully they’re not playing favorites) and can move along and do what is best for the company;
  • Putting the business up for sale – This can be an unpopular decision, but sometimes it is best for all parties involved. It is important for divorcing couples to remember that less than 50 percent of small business put up for sale actually sell. Selling the business should be a last option given that you have hopefully been successful financially up to now with it. If the business is bringing in good revenues, both parties are advised to work out a situation so that scenario can continue.

At the end of the day, both involved parties need to ask themselves if they could see a scenario where they could be divorced from one another, yet work together on a regular basis.

If the answer is yes, that can be great for business. If the answer is no, here’s hoping the remaining individual knows what they’re doing.

Dave Thomas writes extensively for B2b lead generation online resource Resource Nation that provides expert advice on purchasing and outsourcing decisions for small business owners and entrepreneurs. He is an expert writer on items like credit card processing companies and is based in San Diego, California.