Running the Marital Business After Divorce

By The Law Offices of Ronald H. Kauffman of Ronald H. Kauffman, P.A. posted in Equitable Distribution on Monday, January 25, 2016.

Over 1.4 million businesses are jointly owned and equally operated by husbands and wives, and 1.7 million businesses are jointly owned but run primarily by a husband. Can you run a business after divorce?

The Wall Street Journal has an article today on running a business during and after divorce. The article is primarily aimed at spouses who started and ran a business together during the marriage.

During a divorce, spouses who spent years building a company suddenly find themselves having to divide it up. One spouse may demand a bigger share of the company, another may get defensive about the business’s finances and refuse to divulge details. Old resentments can surface.

The worst case scenario is that you have to liquidate the business, and split any proceeds. When you’re going through a divorce, people don’t always act their best. If you have a bad relationship with your spouse, they may not be compelled to find another solution besides liquidating.

I’ve written about the impact of divorce on business values before. Selling a business is a likely scenario in divorce, whether you live in a Community Property state like California, or an Equitable Distribution state like Florida.

In Florida courts have to set apart the non-marital assets and liabilities, then distribute the marital assets and liabilities between spouses. The court starts with the premise that the distribution should be equal, unless there is a reason for an unequal distribution.

Some of the reasons for dividing property, including businesses, unequally are:

(1) The economic circumstances of the parties.

(2) The duration of the marriage.

(3) Interruption of personal careers or educational opportunities.

(4) The contribution to the personal career or education of the other spouse.

(5) The desirability of retaining an interest in a business intact and free from any claim or interference by the other party.

(6) The contribution of each spouse to the acquisition, enhancement, and production of income.

(7) The intentional waste, depletion or destruction of marital assets.

If spouses can’t live with each other, there’s a good chance they won’t be able to work together either. However, to stay in business together, couples need ask some questions:

– Will you be more successful together or apart?

– Are the children better off if the business closes?

– Can you communicate effectively with each other?

– Can you define new boundaries at work?

While it’s impossible to take emotions entirely out of the process, businesses do survive divorce, and the emotional turmoil can be minimized.

The Wall Street Journal article is here.