The period when your involvement in the business is in its early stages can be compared to a honeymoon. You are full of ideas, ready to work around the clock, focused only on growth and development, and open to strategic plans with business partners. Of course, when forming a start-up team, few people think about the possibility that a boat full of romantic goals and dreams can crash on the rocks of everyday problems, financial risks, and wasted investments.
Holding stakes in a company is not only the possession of some leverage over processes and the ability to influence the general vector of doing business. It includes collective responsibility for the business’s future, which you always share with your business partners. And one of the things that you are unlikely to be able to predict is how relationships in the families of your business partners can affect your overall business.
It is not customary to talk about the consequences of the crisis of family relations and divorce for business at the stages of business cooperation formation. However, only when faced with the process of division and subsequent distribution of the joint property of the spouses can you realize the full scale of the problem. The complexity of the situation is aggravated if the marriage contract contains a clause stating that the spouses have the right to dispose of half of their partner’s shares.
It is only natural that the crisis of family relations and the divorce proceedings are considered sufficiently personal and even too intimate to be discussed with colleagues and business partners. Often these risks are not taken as seriously as the business requires. However, it is crucial to have some guidance and a backup plan if the unexpected happens. So how should you behave effectively if your business partner is getting a divorce? Let’s try to highlight the main points together!
The one who owns the information owns the world!
Of course, you may not always be able to control the entire situation around the business and take into account all the factors affecting its conduct when you are a business partner. The rest of the co-owners and founders may face a difficult divorce case, and then some decisions become an obligation of the court. However, the court cannot independently voice a decision that would affect a third party. And you, being in the status of a business partner, become the most interested party who cares about the fate of equity participation in the common business.
After your business partner divorces, the spouse can dispose of half of the partner’s share in the business, and the court determines the position and size of assets and debts. The first thing you can take the initiative to do is to assess the business’s assets and liabilities. More detailed information on this issue will help to represent the company’s interests more effectively if any disagreements arise in divorce and division of property.
As you review the materials related to your business partner’s marriage agreement, pay particular attention to how the provisions for the division of business assets between spouses are formulated. In some cases, a business partner may consider dissolving the business. The calculation of assets and liabilities planned to be separated may be quite simple, since everything depends on knowing the value of assets minus liabilities.
It is impossible to grasp the immensity!
Of course, you can try to study the issue from the inside. However, without being an expert in family law and divorce proceedings, you are unlikely to control all the smallest details associated with joint business ownership. If the case takes a severe turn, you should not underestimate the work of professional lawyers and divorce attorneys.
On the other hand, you can contribute to a more convenient divorce process for everyone involved by advising your business partner to do everything possible to implement an uncontested divorce.
An uncontested divorce is available today in all fifty American states. It implies a format of the procedure in which, at the initial stage, the spouses have a mutual desire to annul the marriage. There are no mutual claims on any hypothetically controversial issues, including raising children, joint property, real estate and debts, and the rights to part of the business or equity participation in it.
Among the obvious advantages of this format of divorce proceedings is the ability to plan the budget for all preparatory procedures and the high chances that spouses can do without the help of hired lawyers and additional unnecessary visits to the court. It is also very relevant to use Internet tools for preparing the documents for divorce. Special online services, such as Online Divorce, allow you to get the necessary divorce papers completed quickly, inexpensively, and without unnecessary hassle.
Trust your business partners, but always be on the lookout!
When you are a business partner, at the initial stage of concluding agreements on co-ownership of shares of the company, it would not be superfluous for you to pay attention to such points as your right to amend agreements in case of unforeseen circumstances. And no matter how strange it may sound, the divorce proceedings of your business partner can become a kind of force majeure.
Be prepared for the fact that you may have to defend your shares if the court transfers part of the shares to your partner’s spouse. If the business is a limited liability company, make sure that the shareholder agreement specifies the exact method of valuation and that shareholders should agree on how to proceed in the event of a divorce. Your partner is entitled to income from the business in case of owning minority interests in the business. The share of income will be determined by the court, which will divide it according to the spouse’s share in the business in question.
Risk is a noble cause, but the fewer the risks, the more chances of success!
Yes, people are strange, as was sung in a famous song, but every time you become a participant in a business, you have to consider the important role of the human factor. Everything mentioned above can be reduced to one denominator: think of all scenarios and calculate the business risks.
The goal of every business is growth, development, and expansion. Many modern companies fail because the risks were not mitigated at the start of the business. Therefore, always strive to be attentive to the details within your team, not just to the strategic steps. If the above-described problem has already happened to your business, be prepared for possible inconveniences to you personally, but compromise solutions that can save your business in the future.