Divorce and businesses do not often work well when the couple owns a business. Even being members in a limited liability company can create problems, which are hopefully also addressed in any operating agreement. Virginia couples who are separating should decide early on what they want to do with a co-owned company because many times the entire family may be impacted. This is especially true if there are minor dependent children to consider. Depending on the family situation, there are steps that can be taken in a divorce agreement that protects the business.
Separate company and family finances
One of the best proactive steps is having distinct financial records that apply strictly to the company and family. This should actually be standard business format. Problems can arise when negotiating a divorce agreement if a family home has been used to serve as collateral on a business loan. This is a common issue in some business divorces, and it is good to prepare in advance if possible.
Options to consider
There are also cases where a divorce is not necessarily a business divorce. Both spouses can maintain a percentage of ownership in some cases. Additionally, an installment payoff plan could be included or one spouse can be given primary control and share profits with the ex-spouse in some situations. This can help provide ongoing support for dependent children and establish an agreement at least until they become adults. Additionally, a partial buyout could be feasible, or a replacement business partner could also buy into ownership.
It is also important to remember to include language covering personal liability and company separation. Non-competition agreements can also be very important when the leaving spouse is also recognized in the industry. This can also especially apply when they will be conducting business in the same area and attracting the same customer clientele.