Legal Professionals of Hirsch & Ehlenberger

Why a family business can complicate a divorce

On Behalf of | Jul 9, 2024 | Divorce

Some people start a small business because they become locally famous for their barbecue sauce recipe or their Earl Gray cupcakes. Other people take over family businesses or buy into franchises. There are also thousands of professionals who secure a state license to operate in a highly-skilled profession and then begin their own professional practices.

Running a small business is both demanding and rewarding. Many people find it exhilarating to have control over their own careers and their income. They might run the business in conjunction with their close family members. When someone files for divorce, the business that they run could make the process significantly more complex. How can a business or professional practice affect divorce proceedings?

Family members may work at the company

In addition to having an interest in the business itself, people may derive their income by working at the company that they run. They may have hired their spouse and their in-laws. They may then be in a relatively challenging situation when they decide to divorce. People may need to negotiate with their spouses and other family members to give them time to leave the company. They may also need to negotiate contracts that allow them to continue employing family members during and after the divorce process.

Determining if the business is at risk of division

The value of the business itself could be part of the marital estate. The spouses may have to negotiate an arrangement in which they divide the company’s value as part of the divorce proceedings. When someone started the company and how much they have invested in it during the marriage can influence whether or not the organization is at risk during the divorce. Spouses with marital agreements are sometimes able to protect the companies they own from the implications of divorce.

Protecting the organization from liquidation

Continued joint ownership or the forced sale of the business are two of the most stressful potential outcomes when business owners divorce. People often need to strategize carefully to avoid the worst-case scenario that could endanger their business resources and their future income.

From how they value the company to how they settle property division disputes, there are many concerns that can directly impact the outcome of a divorce involving a family-owned business. Identifying potential issues before they lead to conflict may benefit those preparing for high-asset divorce proceedings accordingly.


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