Dividing assets during a divorce can often lead to disagreements and conflict. It is especially true when it comes to splitting a family business. In many cases, the two parties involved in the split may have very different ideas about dividing the company, leading to arguments and misunderstandings, making the situation miserable for both sides of the divorce.
If you are facing the prospect of splitting a family business in your divorce, it is vital to have a clear understanding of the process. The strategy will help you avoid common pitfalls and ensure that the division of assets is fair to both sides.
If you and your former partner want to split amicably, these steps will be necessary for the family business.
Determine the Keeper
When splitting a family business in a divorce, it is crucial to determine who will keep and run the company moving forward. The step ensures that the business remains operational and continues to generate income for both sides of the divorce. If you mishandle this process, it can lead to disagreements and conflict, which will only worsen the situation for everyone involved.
The first step is to sit down with your former partner and discuss who will keep the business. It is essential to be open and honest during this conversation. Each person should state their case for why they believe they should be the one to keep the business. Once you have both had a chance to speak, it is time to decide.
If you cannot agree about who should keep the business, you may need to seek outside help. You can hire a mediator to assist you in making this decision. A mediator is a neutral third party who will help you and your former partner communicate and agree about the division of assets.
Maintain Rights and Obligations for Both Sides
When splitting a family business into a divorce, both sides need to know their rights and obligations. It helps ensure that the divorce does not harm the company and that everyone involved receives proper treatment.
If one side is not aware of their rights and obligations, they may accidentally damage the business or cause disagreements with the other side. Those things can lead to costly legal battles and animosity between the two parties. Therefore, both sides must be aware of their rights and obligations to the family business. It will help keep the business running smoothly and prevent significant disputes.
Divide Assets Properly
When splitting a family business into a divorce, it is crucial to agree on dividing the assets. If you cannot agree, the situation can quickly become messy and complicated. It is important to remember that the business is typically one of the most valuable assets in a divorce. Here are some reasons why divorced couples must agree on how they’ll divide assets from their family business:
- Money: The family business is often a source of income for both parties involved in the divorce. It can quickly become a costly legal battle when divorced couples cannot come to a mutual agreement.
- Property: The family business may own property, such as an office or warehouse. If the couple does not agree on dividing the property, it can lead to arguments and conflict.
- Employees: The family business may have loyal employees to one side or the other. Refusal to settle could lead to problems with employee morale and productivity.
- Customers: The family business may have loyal customers to one side or the other. Customer satisfaction and retention might suffer because of the messy divorce.
- Suppliers: The family business may have supplier relationships crucial to its operation. Suppliers might have to change when one side leaves the company or the marriage.
Create an Accurate Business Valuation
One of the most critical aspects of splitting a family business in a divorce is creating an accurate business valuation. It will help ensure that both sides receive a fair share of the assets.
Several factors are necessary to consider when creating an accurate valuation. Some of the most important factors include:
- The business as a whole
- Company assets
All of these factors are essential when creating an accurate valuation. If one side is not aware of these factors, it can lead to problems down the road.
Hire a Family Lawyer
When splitting a family business in a divorce, having a family attorney represent each side is essential. A family lawyer can help protect the interests of each party and make sure that the divorce does not harm the company.
A family lawyer can help negotiate a fair settlement between the two parties. They can also help draft an agreement that will adequately divide the assets of the family business.
Divorce is never easy, but it can be challenging when the family business is involved. If you’re going through a divorce and splitting the company is messy, many negative consequences may occur. Fortunately, these steps ensure that the outcome will benefit both sides.