Divorce Issues for Small Business Owners
Divorce and business don’t mix. Nevertheless, small business owners could quickly lose control of their business when their marriage ends up in divorce court. Florida is an equitable distribution state, and some or all of a business’ value could be subject to division.
If you have built a small business, you need an attorney who understands the unique issues you face in divorce. Below, our Jupiter equitable distribution lawyer looks at a few.
Protecting Your Business Reputation
Divorce is often fraught with conflict, and you want to do everything possible to keep it from spilling over into your business. Some key issues include:
- Whether your spouse should continue to work for the business. Your spouse could sabotage the business or poison employees against you. It is hard to fire a spouse, especially when they are a co-owner.
- How to protect trade secrets or other intellectual property from public disclosure. Divorce is a public process, and valuable information could leak out, harming your profitability.
- Whether your spouse disparages you or the business on social media or to customers. This conduct could materially affect your bottom line.
Ideally, you will ask your spouse and their lawyers to sign confidentiality agreements to protect customer lists, trade secrets, and other business information. If your spouse balks at signing anything, your attorney might need to ask for the court’s intervention.
Valuing the Business Property
If you started the business while married, or if it grew while you were married, then some or all of its value could be considered marital. This means it goes into the pot with other marital assets (like your home) to be divided between you and your spouse.
Small businesses raise many issues regarding valuation. There are different approaches for arriving at a number, such as looking at cash flow or how much an equivalent business has sold for on the market. Different approaches can yield different numbers, so hiring an experienced attorney is key.
Maintaining Control of the Business
If some of the business is marital, a key issue involves trying to keep the business whole. In some situations, the only option might be to sell the business and then divide the equity. This is often a tragic result, and we try to avoid it.
There are other options we can discuss with our clients:
- Giving your spouse more of other marital assets, such as a retirement account or real estate.
- Obtaining a loan to buy out your spouse’s equity interest in the business.
- Creating an installment agreement to eventually buy out your spouse.
The ideal path to take depends on several factors, such as your ability to obtain a loan and whether you have other marital assets of an equivalent value. The sooner we can begin to think about these issues, the better.
We Offer a Free Consultation
Caroline Olson, P.A. is proud to represent many small business owners in their divorce. Our office is fully prepared to protect your business’ integrity, so that you can continue to serve your clients when you finally emerge from divorce court. Contact us today to schedule a free initial consultation.