When spouses approach the property division process, the assumption is that they know more about their estates than any judge ever could. Although judges do their best to make the fairest, most equitable decisions based on all of the factors at play, the truth is that they can never understand the intimate details of the family in the same way as the spouses. When a family business is involved, these truths become even more notable. A judge is not a business expert, and they cannot understand the unique nature of various family businesses owned by divorcing couples. For this reason, their decisions often prove detrimental to the success of the businesses and the general outcome of the divorces.
Fortunately, collaborative divorce can address many of these concerns. When spouses choose collaborative divorce instead of a “traditional,” litigated divorce, they can experience many benefits. Generally speaking, couples can benefit from a greater degree of control, freedom, and flexibility as they navigate the collaborative divorce process. This can help them ensure the long-term survival of their business, which can then provide the family with considerable funds long into the future.
Understanding a Business’ True Value
The true value of a business lies not in its immediate value, but rather its potential to continue generating income long into the future. A business may also have the potential to grow considerably throughout the years. For example, Apple might not have been a valuable company in its early years, but its founder understood its potential from the very beginning. Because of these factors, evaluating the business during a divorce is an imprecise process.
Alternatives to Splitting the Business
Splitting a business in a roughly “50/50” manner during a divorce can be incredibly detrimental. First of all, this arbitrary division may not be fair based on how much work both spouses have put into the business. Second of all, robbing a business of half its assets can easily bankrupt it. This in turn robs the family of decades of potential financial support that might have been provided long into the future. This is not beneficial for anyone (including the children), and collaborative divorce allows couples to explore a range of additional options.
For example, spouses could continue operating the business together as co-owners. Although they both split the proceeds from the business operations, the business is allowed to continue operating without the risk of divorce-induced bankruptcy. Alternatively, one spouse might decide to “buy out” the other’s interests in the business. Another option is to trade assets. For example, one spouse might receive full ownership of the family home while the other maintains full control and ownership over the family business.
Issues may arise if spouses do not wish to interact with each other on a regular basis after the marriage ends. In this case, it may be impossible to continue operating the business as co-owners. However, it is important not to “expel” spouses who are integral to the success of the business. These spouses should be kept in leadership positions if at all possible. All of these options are on the table when couples choose collaborative divorce, and they do not have to feel forced into actions that would harm their businesses.
About the author