If You Are A Small Business Owner Facing Divorce, Get Specialized Help

They are in the news every month – the celebrity or business owner going through an excruciating divorce that threatens to wipe out their life’s work.  I was reading an article recently about Frank and Jaimie McCourt. Frank (and arguably Jaimie) was the owner of the L.A. Dodgers until the divorce closed the door.  Ms. McCourt fought her husband tooth and nail for half ownership of the team.  When it was over, Jaimie agreed to surrender the bankrupt team to Frank in exchange for a promise of about $130 million. 

What has that got to do with you?  Maybe more than you want to know.  It is a great example of the risks of going through a divorce that involves a family business.  While most of us don’t have a gazillion dollars to fight over, many of us own small businesses.  Often one or both spouses work in the business, and when the divorce comes along, sorting out the pieces is a nightmare.  And that is just between the two spouses!

It is common for two or more individuals to own and run a business together.  One owner gets divorced and the other owners suddenly find themselves in a bad place.  Business records may be scrutinized in the divorce by experts for the parties and by the court.  The non-owner will often claim an interest in the business and may even try exerting some control over the business.  Can you imagine the heartburn?

There is no way to be completely certain to avoid such headaches, but there are precautions that may provide the business owner some security and may minimize the turmoil.  Prenuptial agreements setting out the rights of the spouses in the event of a divorce are great if done properly.  They can specify how any business interest will be treated in the event of divorce – up to and including exclusion of the business from the marital assets. 

A buy-sell agreement between owners is also critical to minimize the uncertainty associated with the divorce of any owner, since it establishes rights vis-à-vis the owners of the company.  Such agreements determine what happens if one of the owners dies or leaves the company.  I’ve heard them referred to as prenuptial agreements between the owners.

If you are unsure of where your business stands, or you own a small business and are facing (or are in the midst of) a divorce, you need to consult with counsel who are experienced not only in the field of family law, but in the field of business law and contracts as well.  If you find yourself in such a situation, give us a call.  We can help.