Can Divorce Affect A Business Partnership?


Can Divorce Affect A Business Partnership? Currently, millions of copreneurs are leaving their mark in the business world. Now, who are these copreneurs? Well, in the United States it is a common term, used to describe couples who work as partners in a business. This kind of partnership works well as long as there is no marital issue between the couples that ends in a divorce. The dynamics get even more complicated when there are more partners involved who get tossed around between the quarreling spouses.  Basically, the divorce can affect multiple parties: the spouses, other partners and the business itself. Proper planning by the partners is mandatory to ensure that the divorce does not affect the structure and the financial condition of the business. This likely means they need to understand how to protect business during divorce.

Divorce does not necessarily mean that the partners cannot retain their share in the company. The partners are probably willing to trade together, even though they are undergoing divorce. If you are thinking, “how to protect my business ahead of divorce," here are a few tips. Read on to understand what to do in case you are divorced but still in business together.

Pre-nuptial Agreement

If you plan to marry your business partner, it is always better to sign a pre-nuptial agreement. It is clearly stated in the agreement as what property will be considered marital property and what will remain separate property. Remember, separate property is not subject to division in case of a divorce. So, even if you separate from your spouse, you’ll be able to retain your separate property.

Partnership Agreement

Signing a partnership agreement also lessens the problems that are associated with a divorce. It should be clearly stated in the agreement how the shares would be transferred, how the assets would be divided, how the funds would be transferred, etc. This agreement must be signed to avoid any squabbles in the future.

Maintaining Professional Relationship

Although tough, two mature people can maintain business relationship irrespective of the divorce. They must know how to separate family issues from business issues. Notwithstanding the divorce, they must have enough respect for each other to cooperate and work together in peace so that the employees and the clients are not stressed by the strained relationship between the partners. However, it has been seen that in many cases the stresses of divorce and the aftermath of the divorce affects the business relationship and spouses are often not able to maintain the partnership for long.

Mutual Agreement

One spouse may pay the alimony and ask the other person to leave. Under such circumstances, there remains only one partner and no squabbles ensue. In case, it’s a retail business and there are a few stores, then the spouses can make an equal division of the stores. For instance, if there are 4 stores, one spouse can keep two and another the remaining two with appropriate financial adjustments. This assumes an appropriate division of property.

Selling a business

The final possibility is to sell the business, that is, only if you feel you cannot continue your business with your spouse. Of course, before selling a business, you have to value your business. The valuation would depend on:

  • Structure of business: whether it is a limited company or a partnership business.
  • Earnings from the business: this includes the total incomes, profits etc.
  • Assets of the business: this includes the property, liquid assets etc.

Valuing a business or dividing the business between two business partners who are divorced in personal life can be a complicated process. It is therefore important to seek legal advice before taking any action.  If you want to know how divorce affects a business partnership, get in touch with The Watson Firm. We can give sound advice and help you deal with divorce and business partnership issues.  All you need to do is to call at 205.545.7278 or fill the form on this page to seek our assistance.