Married "copreneurs" -- that is, those couples in Colorado who share a small business -- often put a great deal of effort into seeing that their business is prosperous. It is a lot of work, but it is also a labor of love. However, should the couple divorce, the question of what happens to the business gets pretty complex.
First, sometimes business owners do not document the rules of how they are going to handle the business in writing. Some business entities have bylaws and agreements in place regarding the ownership of the business, the business's practices, and how to transfer ownership of the business. However, should a business not have these types of documents, it is up to the court to determine how to proceed.
Next comes the question of whether one or both spouses should retain the business. On occasion, both parties able to continue playing a role in the business after a divorce, so long as they can still communicate effectively with one another and so long as they can develop specific, delineated responsibilities with regards to their roles in the business. Simply retaining a job title may not be enough to reduce conflict, especially if one party feels they have worked harder than the other in running the business or that their partner is harming the business.
Sometimes, if one party will retain the business post-divorce, they may want to put off improving the business until after the divorce process is complete. Their reasoning may be that they do not want the business's value to go up before the divorce is final, so they will have an advantage when it comes to property division or a buy-out. However, this wait could ultimately harm the business itself.
The issue of cash can also be problematic. A business is often one of the couple's most valuable assets. If one party will continue working in the business, they will need to be paid an income. How high this income affects how much is left in the business for the spouses split proportionally as owners or how much it will take for a buy-out to occur.
As this shows, a divorce involving a family business can be very complex. Spouses facing these and other high asset divorce issues may want to educate themselves about their legal options. This can help them make informed choices and protect their right.
Source: mediate.com, "The Family Business in Divorce: Issues for Mediators," Jeffrey Fink, May 2013
Tags: High Asset Divorce
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