This article looks at the various ways a divorce can impact a small business and how to deal with the fallout.
Divorce is time-consuming and, in many cases, it can be expensive too. As Reuters points out, those two factors can be particularly painful for small business owners, who may find that they are too distracted by their divorce to focus on running a business or who may even have to consider selling their business in accordance with a final divorce settlement. Below is a look at how divorce can have a particularly damaging impact on a small business and how to go about saving a small business from that fallout.
Divorce is time-consuming
Running a small business takes time, but when a divorce is going on in the background it can be difficult to dedicate enough time to running that business smoothly. Furthermore, if one’s soon-to-be ex-spouse also helped run the business, then his or her absence could put even more pressure on the remaining spouse who will have to take care of the ex-spouse’s business duties.
What happens to the business?
In most cases, a small business is just as much part of a couple’s marital estate as the family home, vehicles, or joint bank accounts are. In a lot of instances, that means that each spouse will be due at least a share of the value in the small business. Of course, one spouse can simply buy out the other spouse’s share in the business, thus allowing the business to carry on. However, such a solution may not always be possible, either because one spouse can’t afford the other spouse’s share or because both spouses cannot agree on how much the business is actually worth. That may leave the business owner with few options, such as either selling the business outright and selling the proceeds or continuing on as business partners with an ex-spouse, which is obviously not an ideal situation in most instances.
Consider a prenup
One way to avoid divorce significantly hampering the survival of one’s business is to have a prenuptial agreement in place beforehand. As MarketWatch reports, a prenuptial agreement is especially useful in a community property state like Texas. With a prenuptial agreement, the spouses decide for themselves what happens to the business in the event of a divorce. This can ensure that if and when a divorce happens, both spouses have a much better idea of what the path forward is, thus allowing one or both to dedicate more time to the business and do not have to worry about the business being sold or closed against their wishes.
Family law help
For those who are going through a divorce, getting legal help is important. Especially in cases where a small business may be involved, an attorney can help clients navigate the complex legal issues that will have to be resolved and help them advocate for their rights and best interests.