Divorce isn’t easy for anyone and is especially difficult for couples who own a business together. While a divorce will impact all areas of your life, it can be especially detrimental to a joint business venture – unless you’re careful.
While it’s possible to navigate a divorce with your business intact, it takes some skill, some forethought, and some intention. In this post, we’ll take a look at the common impacts of divorce on a business, and how you can safeguard your livelihood from the worst impacts of a divorce.
Let’s dive in.
How Divorce Impacts Business Owners
Whether you’ve been through it before or you’ve seen friends and loved ones navigate it, you know divorce has a major impact on life. Here are the top five ways our family law attorneys see divorce impacting business owners:
1. Impacts on your assets
Divorce can have a devastating impact on your assets. Part of a divorce is the division of marital assets, which can deal a severe blow to even the most successful business.
In most states, marital assets are assets that are accumulated during the marriage. Florida is an equitable distribution state and the division of marital assets and liabilities is governed by Florida Statute Section 61.075. Even if you owned the business before you were married, your spouse will be entitled to a portion of the value of the business accumulated during the marriage. In Florida, though, anything acquired during the marriage is considered a marital asset.
This means that if you started or purchased a business with your spouse, it will be considered a marital asset, regardless of whether your spouse plays a day-to-day role in the business itself. Sometimes a business is a couple’s biggest asset and it may be necessary to have the business valued by an expert. Even if you have incorporated your business, it will be subject to equitable distribution.
To protect your assets throughout this process, it’s essential to work with a skilled attorney who can guide you and your spouse toward what’s in both of your best interests.
2. Changes to the ownership structure of your company
Incorporating your business or establishing an LLC or an S Corp does not protect your business from equitable distribution. Say you and your spouse co-own a family business. Your spouse is filing for divorce, though, which could leave you with a major increase in your daily responsibilities. The courts disfavor ordering the parties to continue working together in a business so you need to consider which spouse might take over the business and identify creative ways to buy the other spouse’s share of the business.
Running a family business during the process of the divorce presents its own challenges. If you and your spouse simply can’t get along well enough to run the business during the divorce, it may be necessary to ask the court to enter a temporary order that addresses interim issues.
Whatever the case may be, it’s important to brace yourself for changes to your respective roles and daily responsibilities. You’ll also have to prepare yourself to address how your divorce will impact other business partners or investors in the company.
3. Impacts on your company’s reputation
If you own a family-run business, your divorce could become big news in your community. Unfortunately for business owners, divorce can quickly become a public affair.
Even if your divorce doesn’t garner as much press as the high-profile divorces of business titans like Bill Gates, it may still impact your company’s reputation – especially if there are rumors surrounding conduct like an extramarital affair.
The more contentious and strained your divorce process is, the more likely it is that it will impact life outside the divorce, and even spill over into your business. As such, it’s important to avoid common divorce mistakes (like posting too much on social media), be proactive about divorce-proofing your company in advance, and keep things as close to the vest as possible until things blow over.
4. Mental health impacts and changes to your ability to work
Even if your divorce really doesn’t touch the functional aspects of your business, it can impact your mental health and make it difficult for you to maintain your former level of work.
When you combine the stress of divorce with the daily challenges of running a business, you may find it very difficult to navigate the process. If you find you’re struggling with mental health during your divorce, contact a skilled therapist who can help you work through the process.
5. Changes in employment
If you run a family business, chances are you employ workers who have been with you for years. It’s also likely that you consider many of these employees friends, and that they’ve become close to you and your family.
Unfortunately, a divorce has the potential to change that. Social groups often have to choose sides after a breakup, even in the most amicable of divorces. Since it’s difficult to be friends with both spouses, they generally have to select one or the other.
While this doesn’t seem like it should impact your workforce, it may mean that workers who were closer to your ex-spouse will choose to exit the company. While there’s no way to prevent this from happening, you can try to get ahead of it by having an honest conversation with your employees about the divorce. Include your spouse, if possible, and be as upfront with everyone as possible. Tell employees what they can expect regarding changes to the company’s structure, and whether certain jobs, roles, or positions are now in jeopardy.
While this seems like a small step, it communicates respect for your workers and can help prevent a mass exodus from your business.
Protect Your Business With the Help of a Family Law Attorney
If you’re going through a divorce, our team can help you protect your company and keep your assets secure. Here at MGM Law, our family law attorneys work with Pensacola business owners like you to streamline and demystify the divorce process, and to help make it as painless and civilized as possible.
Contact us today to learn more, or to schedule your consultation.