Family-owned businesses are a critical part of the U.S. economy. It is estimated that more than 80 percent of businesses in the U.S. are family owned. So, when a principal owner of a family business is facing a divorce it can have a severe effect on the business. Making sure the divorce is handled correctly requires careful planning.
There are several options that a person may have in a divorce situation regarding their family business.
- Shareholder agreement. If a company has a shareholder agreement it may have provisions as to what will happen to the business if there is a divorce. If the shareholder agreement provides a process as to how the business will proceed in the event of a divorce, then it can accordingly.
- Prenuptial agreement. When a business owner gets married, they often have a prenuptial agreement created. The prenuptial agreement would have information as to what happens to the business assets if a marriage ends.
- Sell the company. Selling the business will allow both spouses to step away from the business and receive equal compensation. The spouses can split the profit equally or in another formula that is agreed upon.
- Buy out the other owner. If both spouses own the company, then one spouse may choose to buy the other out. This is a good way to ensure the company will continue operation while compensating both parties.
- Divide up the business. Depending on the business there may be a way to split it into two companies or divide up the operations.
- Continue running the business. A couple may choose to continue running the business as business partners but no longer married. Although it can be difficult to keep business and personal matters separate.
A legal professional who is skilled in divorce can help their client understand what their options may be for their family business and help them negotiate a settlement that protects their interests.