What happens when mom and pop get a divorce but neither one wants to leave the shop?
A 2007 Census Bureau report said that roughly 3.7 million businesses are owned by a husband and wife team. With thedivorce rate at a staggering 50 percent, the situation is far more common than many people realize. With some planning, a couple who once promised “until death do us part,” may be able to continue the family business.
Too often entrepreneurs are so busy getting their businesses off the ground that they don’t think about what might happen if one of the founders gets divorced. The problems are magnified if the businesses’ co-founders divorce each other. For family-owned businesses, run by married couples, a poorly dealt with divorce can mean bankruptcy court is in the future.
Create an Agreement
Most business partners sign a shareholders agreement to lay out a guideline of what to do should one partner decide to sell. Marriages couples seldom do. The agreement should spell out in detail how they will split the business if either decides to leave. The key is to draft an agreement that puts the interests of the business above the interests of the individual shareholders.
Talk to the Employees
Almost like children in a divorce, employees often pick sides. If that occurs, the business can quickly fall apart. Couples should come up with a mutually agreeable story that they can share when they reassure staff that the issues are being dealt with and the company will not be affected.
Divorce is more than a legal split. Compartmentalize the issues, legal, financial and emotional, so they don’t get mixed up. Determine what the issues, needs and preferable outcomes are. When a romantic relationship is breaking up, the tendency is to allow personal issues to interfere with business relationships — and the other way around. Compartmentalizing can help untangle the threads allowing for time to set specific goals and make concrete, and separate, plans.
As the relationship gets redefined, both people should draw clear lines around their roles and responsibilities at the work place. Redefine the relationship and identify what task(s) each person will take care of. This will help avoid micromanaging each other. With clearly defined roles and communication, working together doesn’t mean constantly collaborating — which can also be emotionally taxing and lead to more emotional reactions.
Make Sure You Know Who Your Attorney is Working For
Some divorce attorneys try to prolong the proceedings to inflate their bills. Finding the right attorney is crucial to streamlining the process and saving some money. The ideal situation happens when the two parties can make the best effort possible to negotiate and make the process as friendly as possible. Divorce can be painful and it can be tempting to inflict pain on the other party. However, inflicting pain for pain’s sake can be expensive, so it’s smart to find a lawyer who is looking out for your best interests and will advise seeing an amicable — and less expensive — solution.
Build a Team
A team of personal advisers is important. Divorce can be distracting, but having friends and trusted associates double-check your thinking can help forestall costly mistakes.
Prepare for the ongoing effects of divorce. Regardless of how smoothly the legal proceedings go, people need to remember the lasting emotional and financial effects of divorce. While many businesses and re-group and thrive, it’s not guaranteed.
Realize that no decisions have to be final. In the same way that an exit clause should be built into the company bylaws, remember that months or years later, positions in the company may change and evolve. Understanding that the situation may shift and grow can take the pressure off making all the decisions at once and allow for time to adjust to the new relationship with the ex.