Sharing a Business When a Marriage Ends

You built your business together. What happens to the company when your marriage ends? When considering the future, your options include selling the business, a buyout, and continuing to co-own the business together. If the option to continue running a business together after you separate is something you are considering, there are a variety of factors to think about. An attorney can help you evaluate potential implications and risks. There are also often intense feelings when couples split, as well as conflicts, grudges, and other issues that make up all of the reasons for divorce. These issues can cause serious problems when dealing with something as high stakes as a business, which you and your employees might rely on to pay bills and feed families. As you weigh your options, be honest with yourself and with your soon-to-be ex-spouse about how you feel and how you see the future. You’ll need to consider the emotional toll and your overall compatibility to operate as a team when you are no longer married. Despite going through a divorce, both you and your spouse will need to openly communicate with each other about the changes that a future co-ownership might bring, and may find that multiple conversations are needed to make sure that this is a good idea. Things you will want to consider include:

Boundaries

Once the divorce is finalized, you will be in a position of redefining your relationship from personal to professional. This can take time and should be approached with introspection, understanding, and empathy. At first, it can be challenging to separate past emotions from the present situation, but it often gets easier as routine sets in and you adapt to the new situation. A healthy approach might include giving each other enough space at work to be autonomous and in control, while still collaborating with each other and the team to get the job done. Regularly scheduled check-ins can help.

Intense Emotions

It might seem easy to create boundaries with an ex-spouse in a professional setting, but seeing them day after day may reveal unresolved feelings. Before choosing to share the business post-divorce, it is important to examine how you really feel. Otherwise, your emotions may surprise you later and come out in ways that could be harmful to the business.

Trust

If trust was an issue in your marriage, it can cause cracks in the business that you run together. Over time, these feelings can spill over into the operation of your business and may cause discord among employees or confusion among customers and clients.

Space

When running a business together, you may not find space that you want or need from your ex. You could be working together, seeing each other, talking, and collaborating, even if it is just about business. Without distance, you may find that you have less time to process and heal in the way that you had hoped or that unwanted feelings linger.

Decisions are often easier to make before tempers flare.

Corporate Structure & Roles

While you may have operated under some assumptions while married, it is important to clarify what your role and the role of your spouse will be within the organization going forward. By explicitly defining positions within the corporate structure, you can designate each person's responsibilities within the overall operation. You may want to keep the same roles that you previously held, but other arrangements can be made.

Creating a Contract

As you re-imagine how to run the business with your former spouse, you may want to develop a more structured contractual agreement than when married. A contract can outline how you intend the company to operate so that there is no confusion, and each person will know precisely what their rights and responsibilities are. Your attorney can advise you and help draft this document.

Profits

Money can be particularly contentious. Financial and legal advisors can help you and your former spouse outline how the business's profits will be divided going forward. Establishing this can prevent conflict and stave off legal action down the road. It may also be helpful to get a valuation of the business’s worth so that everyone knows their stake.

Dispute Resolution Mechanism

Conflicts may arise in the future, and because you and your spouse have a history and may have some unresolved emotions about one another, it may be helpful to choose a conflict resolution method that can be employed before you need it. Commonly, businesses choose some form of mediation or arbitration, but an attorney can advise you on options.

Exit Strategy

Having an exit strategy makes good business sense in any case, but may be particularly important for partners trying to run a business after divorce. Having an exit strategy planned ahead of time can guide you in case it becomes apparent that you are not able to make the business relationship work. Decisions are often easier to make before tempers flare. A solid backup plan can help prevent further escalation and allow for the dissolution of your arrangement to happen as smoothly as possible.

Business Coaching

Speaking to a professional consultant, particularly one with experience co-running a business post-divorce, can provide valuable insights into the situation and how others have handled it. They may offer practical advice on how to navigate the operational pitfalls and create a more harmonious work environment.

Legal Counsel

A lawyer should be consulted before you finalize the decision to continue running your business together. They can advise on the legal ramifications and potential liabilities of this arrangement, suggest contracts and structures that can prevent and resolve potential conflict, and continue to be valuable throughout the life of the partnership.

Go Your Own Way

Sharing a business after divorce is possible, but it requires open communication, patience, empathy, and a willingness to redefine your relationship to work in new ways. In some cases, it may be difficult, but, if done well, it may allow your company to remain strong and healthy with the talents of both people who envisioned and built it.