My business  partner is getting a divorce | What to do?

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You have created your business and begun to promote it, you have a clear strategy for the development of the enterprise and profit growth. The system is honed and works like a clock. But one day your business partner comes into the office and tells that he/she is divorcing. On one side, you start to empathize with him or her, but on the other you begin to worry about your business, in which you have invested so much. Can a business partner’s divorce have a negative impact on your company? There is a possibility that a new person will appear on the board, who will have his or her own vision of doing business. The following content is given by Online Divorce – the company making your uncontested divorce is quick and easy.

Marital Property

Divorce lawyers in one voice say that dissolution of marriage in any case affects the conduct of business. However, how strong it will be depends on the circumstances of each individual case of divorce. Contrary to popular belief the property is not divided between the spouses in half. Any separation occurs fairly and justly, after the court analyzes various factors, such as the value of the property, how it was acquired, the contribution of each spouse to the creation and development of a business, and so on. Business can be a family property or part of the financial resource of the spouse. If the company belongs to several owners, the court has some limitations in the process of division of property, since its decision may hurt the interests of third parties not connected with the dissolution of marriage. Also an important factor is the date when the partner entered into the business. If this happened before the marriage, then the chances of separation of the share of business fall. But there may be situations when a spouse who does not own a business gave financial resources to his or her partner in order to increase share of the company, even if company was acquired before marriage. In this case, the share in the business will be divided in fairness, taking into account all contributions. Nevertheless, you should not rely on chance and it is better to worry about your business’s protection in advance.

Property valuation

It is the first step you should take if you find out about your partner’s divorce. You should evaluate all the assets and liabilities of your company, as well as assess the share of your partner.  For some companies, this is quite simple, for example, if it is a small business that does not have a workshop or work equipment. Also, companies that exist for a long time are easy to evaluate, since they have already managed to accumulate all the necessary documentation for expert appraiser. And here you can use various methods. The easiest way to estimate the value of a company is to apply the formula assets minus liabilities. Assets can be either tangible (everything that can be touched, for example, buildings or inventory) or intangible (everything that cannot be touched, for example, patents). The liabilities include all sources of borrowed funds and debt obligations.This method is great for small businesses.  Another way is the market approach, in which the value of the company is calculated on the basis of a similar business that has already been sold. And the last method of income, which uses special formulas and indicators to determine the future income of the company, based on which it’s possible to conclude about the current value of the business. In any case you choose the approach that will be most convenient for you.This step will help you to understand what you are risking and what consequences for you may bring the dissolution of the marriage of your business partner.

Sell a share of the business

So, the assessment has been done and now you know the value of your business and partner’s share. Of course, a reasonable decision would be to discuss with a partner all aspects of the sale of his or her share. For example, you can redeem his or her part of the business or other shareholders can buy it based on an agreement. In some cases, the sale of a share of a company can have serious tax consequences. In this situation the business partner can discuss with the spouse and decide in favor of compensation by other property for the soon to be ex. The partner leaves his or her entire business to himself / herself, while the spouse receives most part of the other property not connected with the business. Any decision can significantly affect the interests of co-owners of the company, so before taking any action the careful analysis of all possible consequences is strongly needed.

Contingency agreement

You can include a contingency solution in your partnership agreement. What is also a good soil for business security. These provisions should contain a list of specific situations that may occur and clear ways to solve them. Since a divorce can be considered an unforeseen situation, as well as a disease or disability, it can be included in a partnership agreement. You should very carefully consider such a document and work out all its provisions with a specialist before signing. In addition, the agreement may contain the rights and obligations of the spouses of each partner. And to regulate their actions in relation to the business if a divorce takes place. What says that the agreement must be signed by the spouses of all partners who owns the company.

 

When it comes to partner’s divorce, this will in any case affect the company. But the severity of the consequences depends on you as well. It makes sense to worry in advance about the fate of your company and draw up additional agreements with partners before someone’s divorce knocks on the door. Think over all difficult situations in advance and prepare special documents that will protect your company. But if it has already happened, be ready for the worst, but hope for the best.

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