Family-owned businesses are very popular. When people have a business idea, they often confide in the person closest to them, and that’s a spouse. They launch it as co-owners because this is something they both care about.
Unfortunately, the marriage may not last. All of those long workweeks take a toll. People drift apart. Issues may arise over time, potentially including everything from alcohol addiction to poor financial habits to infidelity.
The reason that the marriage ends is not that important here. What is important is deciding what to do with the business.
One option is to sell the company. If you sell, you can use the money to pay off any debts, and then you can split up whatever is left over. You divide the worth of the business so that you both get something, and you let someone else take over running day-to-day operations.
A related option is having one spouse buy out the other person’s ownership percentage. In this scenario, one spouse buys the business — perhaps exchanging for their portion of shared assets from the marriage — a retirement fund or a family home, for example — and takes full control of the businesss.
People are often hesitant to give up a steady stream of income and a business that they love. They may decide that they want to keep working together. They may think that their business relationship can thrive or at least persist, even if their romantic relationship is over.
This can work. One of the keys, though, is to clearly define what your relationship will look like in the future, and what roles the two of you are going to have.
One expert who has been through it herself stresses the need to reframe the relationship. The idea here is that you both bring something unique to the company. It would not be the same if one of you took it over and ran it alone. From a business perspective, you may need each other.
Going forward, it’s important to think about exactly what that means, and what you do best. You can then divide the duties of the company to fit your strengths. This lowers the odds of a conflict where you both want to be in control.
Working through your options
You don’t have to jointly run your business after divorce, but it’s important to know that it is one option to consider. Make sure you know your legal rights as you work through everything and find the ideal solution.