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November 2012
SURVIVAL TRAINING: Can Marital Strife Harm or Destroy a Business?
By Steve Ockerman

     If you are a business owner experiencing marital difficulties, you should seek advice from an experienced family lawyer knowledgeable of the methods for protecting you, your business and your family from potential damage caused by separation and divorce. Here are some issues to consider with your lawyer as you work through separation or divorce.

 

The Business as “Marital Property.” Property accumulated during a marriage is subject to division during separation or divorce. A business may be considered such property. The business is typically the most difficult asset to value in marital property distribution, and often the source of a substantial part, or even all of the family income.

     Distributing the value of the business between spouses may be difficult, particularly when the goal is to not damage or destroy the business. Often, the capital needs of the business compete with the needs of the family, as well as the ability of a spouse to transfer to the other spouse a fair share of the property value. Structuring such distributions are a critical aspect of separation and divorce planning.

 

Spouses as Business Partners. It is difficult enough to run a business with one or more partners. If you and your business partner barely speak, or your business partner wants you out of their life, the effects can be disastrous. How do such partners communicate? How are decisions made? Are the partners equal decision-makers? What do the ownership documents say? What if there are no ownership documents? Is there a way to turn over decision-making ability to a neutral? What if one spouse intentionally harms the business? What if your spouse starts a business as your competitor?

 

Paying Alimony and/or Child Support and Managing Cash Flow. Business owners often determine the amount and frequency of their own compensation. This is a business decision that may literally affect the viability of the company. The amount of compensation is often an issue in deciding the amount of spousal or child support and how it is structured.

     How support is paid, as well as the amount, can have an obvious affect on business cash flow. Can the business owner sustain the payments over a long period? What happens in difficult economic times; how does support get paid or restructured? What if the compensation cannot be paid as in the past; how does this affect support?

 

Sharing Kids and Running a Business. Running a business is demanding. It can be difficult to manage work and time with the children. How does this affect a business owner’s rights to his or her children? What if the owner works particularly long or odd hours, or must travel frequently? How are children shared and exchanged?

 

Litigation and Lost Work Days. Days spent in court on separation, divorce, or custody issues are days not spent working. They are not productive days. This can be particularly difficult for the sole proprietor or one with a professional practice, for example doctors or dentists. Court schedules are subject to frequent modification, and the amount of time in court is usually unpredictable.

 

Delayed Ability to Retire. Often the business owner’s largest financial asset is his or her business and retirement accounts. When value is pulled from the business or retirement accounts to satisfy a division of the marital estate, the business owner may face a sharp reduction in lifestyle choices and inability to retire at the age anticipated. This in turn can affect the owner’s succession planning, making such planning even more critical.

 

Workplace Disruption. One of the most distressing problems a business owner may face is when contentious marital issues spill into the workplace itself. An angry spouse suddenly appearing at work to discuss or argue personal issues, or repeatedly calling co-workers, employees, customers, or others, can wreak havoc.

     Employees are often used to seeing a spouse enter a workplace, and so may not be prepared to handle such problems when they arise. Vindictive spouses have been known to sabotage business dealings, steal from the workplace, or drive customers away.

 

     Although issues facing a separating or divorcing business owner may have potential to endanger his or her business, it is important to remember that with proper planning and guidance such issues are manageable, or even avoidable. They need not threaten the survival of the business. It is important to seek advice from a qualified professional to protect you, your business and your family.

 

J.D. at Wishart, Norris, Henninger & Pittman, P.A.
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