The number of family businesses has never been greater, and sadly, the same can be said about divorces. These conditions dictate that we address the issue of navigating these perilous waters. An enterprise is often in the spotlight of the overall property division, which means that the financial impact is felt by both parties. What is more, the personal issues are interwoven with the business operations: As the communication breaks down, emotions start to rule the show, and business is pushed to the breaking point.
On legal ground
Most often, both parties are emotionally and financially invested in the company, having no intention of letting go of it. This is natural since the business is the biggest asset and income stream one possesses. Before making any sudden moves, however, both sides should understand the legal and contractual side of family operations. Family businesses can be rather unripe, and the responsibilities often overlap. The situation is more complicated when there are no written documents that define the ownership of the business, how are profits and losses handled, and module of transferring ownership and related matters.
Necessity should know law
Such blanks are filled by the law. The receiver can usually take over the business organization and sell it, while the court exercises authority over dividing material assets. Furthermore, the process is influenced by the business structure. Limited liability companies, corporations and limited partnerships imply that the debt of the business is not transferred to the owners. Alas, another problem arises if the books aren’t always accurate and kept in accordance with Generally Accepted Accounting Principles. This is most often revealed once the parties try to calculate how much of the cash flow should be allocated to child support. If inconsistencies come up, they only raise the level of suspicion and wariness.
Divorce amplifies the existing problems, and gives rise to disputes over work that doesn’t get done, or as one side sees it, is conducted incompetently. Moreover, couples tend to delay making any improvements to the business, and hold off big sales, worried that the split won’t play out as planned. When this goes on for months, the customers are inclined to drift away, and the business declines, maybe even to the point of ruin. Filing for divorce in Oregon is nice and easy, for example, but even then, there’s no telling how long the ordeal may stretch out. When the dust finally settles, it may be too late to reanimate the company.
The price tag
The major dilemma is whether to allow one side to buy the other out, or to continue “business as usual”. If the purchasing is on the table, then the decision must be reached regarding the source of financing: A cash flow from the family business, third-party financing, or some other security. Furthermore, in this scenario, quarrels are also related to the price of the company, and the court may require a business valuation. The thing is, this is subject to varying methodologies, and many different factors, not the least of which are economic cycles. A trusted expert is a sound choice, but one party can always challenge the valuation.
An open door
Alas, detaching the personal life from business operations is not something that comes easy, especially if the effective lines of communication are severed. Yet, both parties should refrain from diminishing or dismissing each other’s contribution to the enterprise. Put the focus on specific outcomes, not how you ended up in the current predicament. In the wake of failing to rationally approach the implications of the divorce, some more sinister scenarios become a reality— winding up, bankruptcy, forced judicial sale. Try not to dig in your heels during negotiations, and keep an open mind, however hard it may be.
Sorting out family enterprise and dealing with the financial settlement are daunting tasks in regular circumstances, yet alone in the looming shadow of divorce. It takes the complexity of business to the whole new level, and sometimes couples use it as a battleground for emotional clashes. Take time to evaluate all the facts and figures, and be ready to make tough choices. Do your homework prior to each session, and come well-prepared. There are many stumbling blocks you must get past, but dissolving the marriage does not need to involve your business ending up in flames.
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