During a marriage, many couples come to share most aspects of their life with their partners, such as children, finances, and possessions.
And for some married couples, they also share in the ownership or operation of a business or commercial venture.
While balancing married life as both business and romantic partners has proved successful for many couples, for some, it has ended in divorce.
What happens when business partners divorce?
Working out who gets what in any divorce can be complex but divorce between business partners presents a whole new set of challenges and considerations.
When it comes to dividing up a business between divorcing spouses, most people want a clean break. Generally, joint assets and debts are dealt with by one party buying out the other’s interest, or the asset in question is sold and the net proceeds are divided.
Under the Family Law Act, it’s the duty and obligation of the judges to end the financial relations of the parties and make orders which determine their financial relationship. The parties are expected to divide up their property and each to go their respective ways and be otherwise financially independent. But in some instances, this could be a case of “killing the golden goose”.
Thankfully, there are other options you can consider:
Opting to move on
Depending on the circumstances and business structure, if one partner is far more involved in the running of the business and interested in its growth than the other, the divorce process may be a good time for both parties to agree to move on from the business partnership, allowing one partner to continue solo.
For instance, when a family farm or family business has been in one party’s family for generations a divorce may mean it is lost, which could be emotionally devastating. Often one partner may be brilliant at running a business and it makes great sense to the other partner to continue to be supportive, rather than undermine their efforts and cause the business and earning potential to plummet.
Working together apart
Once again, depending on the business structure and situation, it may be possible to split a business or financial asset, with each party running their individual portion. For instance, if you and your spouse manage your own set of clients, it may be an option to divide the business based on these parameters. This way your collective hard work isn’t squandered, and you can both remain financially independent.
Continuing the business
Depending on the nature of your divorce and whether you can maintain an amicable relationship following your separation it may be an option to continue a professional working relationship by jointly running your business. You may find it helps to identify your respective skillset and define your roles and responsibilities to ensure you can equally contribute to the ongoing success of the business.
A recent example of this is a couple who were running a successful interior design business, each earning a high income. They both excelled in managing their own portion of the business, but neither could run the business alone. While their business relationship was strong, their personal relationship was fraught with difficulty following their separation.
Fortunately, the parties entered a collaborative resolution process and with the assistance of collaboratively trained lawyers and financial experts they worked out a suitable trust business structure that allowed the parties to confidently continue to run the business together and maximise profits. They were mature enough to be able to continue a respectful business relationship, even though their personal relationship had ceased.
In complex divorce cases like business and life partners, there are huge benefits in seeking good legal and financial advice. And when it comes to dividing assets it is worthwhile to be open and willing to cooperate and think outside the square.
Particularly by entering a collaborative resolution process, mediation or family dispute resolution, the parties can avoid a bitter and expensive legal battle which often benefits no one except their legal representatives.