Businessmen and women sometimes spend so much time getting their businesses off the ground that they don’t consider what might go wrong if one of them gets divorced. It is, therefore, crucial to take the possibility of divorce into consideration when forming a business and growing a business. The problem is even more critical when the business is owned only by the two spouses who are divorcing each other.
In family-run businesses, a breakup of the marriage often foredooms the business. In virtually all cases, one spouse will leave the business and give up his or her rights to the business. The rights of the departing spouse depend on the existence of any prenuptial agreements, shareholder agreements or buy-sell agreements, or any other contracts which describe how co-owners will relinquish their rights in the event of a divorce or dissolution. It is sometimes very difficult for spouses to separate their emotional disputes with each other or their emotional attachment to the business from the financial and business aspects of re-organizing or dissolving the company. In some cases, in fact, it is the company that is the cause of the divorce – the extensive time spent by the parties working at the company, the pressures of maintaining the business, and the sources of conflict which occur on the job.
Unless the parties can agree on the value of a business, it will be necessary to engage the services of an accredited business valuator, certified public accountant or other expert to determine the value. This can be a complex and costly process. The value of a family business includes cash distributions, fringe benefits, goodwill, and cash from the future sale of the business. Financial statements, tax returns, and other records will be consulted during the valuation process to determine the business profit, liabilities, income and expenses. If the business was established before the marriage, a determination will need to be made as to what portion (value) of the business is subject to distribution in the divorce. Similarly, if the business has other partners or owners, besides one or both spouses getting divorced, then the court will need to decide what portion or value of the business is subject to distribution between the spouses.
Protecting your rights in the business is essential, and you must take certain specific steps from the very beginning of your divorce case (if not sooner) to safeguard your interest. Be sure to contact the Law Offices of Mark S. Guralnick to assist you with this process.
Attorney Mark S. Guralnick holds two MBA degrees, from Columbia University and London Business School, in addition to more than 30 years practicing divorce law. He is particularly skilled in the handling of complex business-related cases. Please feel free to call Mark S. Guralnick if you have any questions.