Can You Manage a Business With Your Ex? Here’s the Impact of Divorce

Can You Manage a Business With Your Ex? Here’s the Impact of Divorce

Divorce affects almost every aspect of your life. If you don’t have kids, you’re not spared the stress of disputes. The division of your marital properties can be as dreadful, especially if you’re not protected by any document such as a prenuptial or post-nuptial agreement.

If you’re managing a business with your spouse before the divorce, then you could be in for a wild ride. For one thing, a vengeful ex may threaten to sabotage the business. For another, they may fight for a bigger share, even if you’re the one who worked harder on it.

On the other hand, if you’re on good terms with your ex, you can keep co-owning the business without major issues. However, you’d still be presented with options on what you wish to do with the company after the divorce. It won’t automatically be a 50/50 distribution.

How Divorce Impacts a Family Business

If one spouse established the business before the marriage, it wouldn’t likely suffer an impact from the divorce. It will remain separate property. However, many companies lose such status during the marriage.

In this scenario, you’ll be entitled to the shares derived from the increased value of the business during the marriage. The increased value can be subject to equal or equitable distribution between you and your ex.

The business will also be considered marital property if your spouse has contributed to it, and likewise if it was started during the marriage. Therefore, it would be subject to distribution.

How Spouses Can Divide the Business

1. One Spouse Keeps the Business

If you’ve signed a buy-sell agreement before or during your marriage, it doesn’t only protect you from divorce, but also other unfortunate events such as the death of your spouse. In the agreement, you can buy out your spouse’s interest in the business based on the appraised value. That saves you from the burden of taxes because the direct purchase of shares owing to divorce isn’t taxable in most circumstances.

2. Both Spouses Sell the Business

The exes can also let go of the business altogether by selling it. However, this tends to prolong the divorce process, and both spouses have to keep working on the business until it gets sold.

3. Both Spouses Keep the Business

Exes that have an emotional attachment to the business tend to choose this route. That may make the most financial sense, but you have to maintain an amicable relationship to make this work.

Co-Managing a Business with an Ex

executive meeting

If you’re sure that you and your ex can keep working harmoniously on your business, then, by all means, give it a chance. There are a couple of perks for maintaining your shared ownership.

One, you get to keep your interests in the business, and so does your ex. Also, the business will no longer undergo an appraisal, which can be a costly procedure, depending on the nature and intricacies of your business.

Co-owning a business together also maintains your contact, which helps in establishing trust. But of course, this is only viable if you’re totally at peace with each other, despite your failed marriage.

Remember that business and marriage are two separate affairs, so even if your relationship with your ex has gone stale, it doesn’t have to compromise your business consequently. If you’re both excellent managers with complementing skill sets, consider whether separating the company is indeed worth it. Your reconciliation may mean greater potentials for your business and successes, so don’t make decisions rashly.

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