Divorce And Your Business

In a recent article in Forbes, the author describes various ways that a divorce can disrupt the normal operations of a spouse’s business, and especially the complications that arise if both spouses work for a business they run together.

Regardless of whether you own your own business or just work as an employee for a business, divorce will inevitably encroach upon the circle you may try to draw around your employment. Why?  Because every divorce involves finances, and your employment is a big source of your finances. So, when it comes time for discovery, do not be surprised if your spouse seeks as much information about your work as possible – your employment file and every data point in it. Some of these items will have no relevance to your divorce and should remain private, while others – like salary and benefits and raises – will be fair game. Because the discovery request will go to your employer, you may want to give your employer a heads up about your divorce and to anticipate some paperwork. Aside from discovery, just going through divorce imposes on your time and can distract you at work, reducing productivity. Try and compartmentalize as much as possible and do your divorce work on your own time.

If you do own a business or have a share in a business, you should expect much more intrusion than just employment records. Valuing a business is part of the process of divorce, because the share of one spouse in the business is in part a marital asset. Determining the value of the business and the marital share in that business can be a daunting task and will require the assistance of forensic accountants who will review a great deal of the records of the business. In this sense, you as a shareholder or owner will feel a level of intrusion. To be best prepared, know this will happen and alert your partners or other employees who may handle some of the discovery requests.

Another important tip: If you and your spouse both work for the business, be sure you each receive an appropriate salary and all work is documented, otherwise a fight over who makes what and who owns what will be much harder to establish.

A final point: A good way to avoid the intrusion into the business would be to have a prenuptial or postnuptial agreement that gives full disclosure of the business at the time of the agreement and sets out a fixed amount that a spouse would receive in the event of a divorce. This will not foreclose all discovery, but it will limit it and also make clear the intent of the parties as to how to share in any marital portion of a spouse’s business.

If you have questions about divorce and your business, contact us – we can help.