Avoiding the “double divorce”

By |2022-03-25T08:14:56+00:0016 Jun 2016|Categories: Business, Divorce, Partnership|

According to the U.S. Census Report, there are roughly 3 million businesses in the U.S. that are co-owned by spouses. But if there’s no written agreement and the marriage ends up in divorce, the business could end up as collateral damage. A breakup of a marriage is one thing. But a breakup of a business, too? That’s even harder. Many feel as though it’s like going through a “double divorce.”

That is why most legal and financial advisors strongly discourage spouses from entering into a business arrangement with each other without a written document that has been vetted by experienced attorneys who can troubleshoot it for you.

So I need a prenup for my business?

In a word, yes. Whenever anyone decides to launch a business, it is customary to draft a plan. The plan may include a operating or partnership agreement that spells out the details of who runs which part of the company and what happens if the business fails. It may feel uncomfortable to have to establish some ground rules before partnering with your spouse in a business venture. But if you don’t, the results can be unnecessarily messy.

Without an agreement in writing, there are no specified rules for what could happen to your business. That means that everything could be up for grabs, and everything related to your business together will be divided according to the rules of your state.

We don’t have a business “pre-nup.” Is it too late?

Not necessarily, but it does make things a whole lot more complicated. You’ll need both family and business lawyers on your side to help you sort out the next steps. And you’ll need a whole lot of patience, as the process can be much longer and more tedious.

It is common for the process to become acutely stressful when the business is the livelihood for both partners: they are both reliant on the business staying solvent. In that scenario, your choices are limited.

Many legal advisors note that there are three standard routes you can take if you and your spouse own a business and decide to divorce.

  1. Dissolve the marriage, but continue to run the company together

  2. One spouse “buys out” the other spouse’s stake in the company

  3. Sell the company and split the proceeds

In any of the above scenarios, a legal team will be required. There are complicated rules in every state regarding property division, business valuation and divorce. Hiring experienced, knowledgeable attorneys to help you through this process will help ensure that it ends well for everyone.

About the Author:

Dorie Anne Rogers - The Law Offices of Dorie A. Rogers, APC
Dorie A. Rogers, a Family Law Specialist, Certified by the State Bar of California, has been an attorney since 1981 with an exclusive family law practice located in Orange County. She is accepting dissolution cases with support and property issues including the use of forensics to ascertain business value, community interests and to establish monthly case flow analysis. Ms. Rogers has substantial experience in high conflict custody litigation involving sophisticated psychological issues. She drafts premarital and postmarital agreement designed to define and establish parties' separate and community property interests. Paternity cases and domestic violence matters are considered part of her practice. Ms. Rogers is a court-approved and court-appointed to represent minor children.Ms. Rogers consults with individuals concerned about entering or exiting a relationship. She advises effective strategies for dissolution or premarital planning. Knowledge is power and good planning affords better results.Specialties: Family Law Specialist, Certified by the State Bar of California
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