Breaking Up is Hard to Do – When There is a Business Involved

Going through a divorce can have serious financial consequences. These can have a much larger impact if there is a business involved.

Tudou, once a contender to become the YouTube of China, lost 18 percent of its value when the former wife of founder, Gary Wang, filed a lawsuit seeking part of Gary’s interests in the company.

Certain property, such as a business owned before a marriage, may remain separate and not part of the divorce property settlement. Other assets, including the family business, may end up being split with your spouse.

There are a few pre-emptive steps you can take to protect your rights and interests in the family business.

The best way to secure your rights is in the form of a pre-nuptial or post-nuptial agreement. In these contracts, both sides agree in writing as to the way to deal with the business if the marriage does not last. Using this method you can reach an agreement while the relationship is still amicable and avoid the emotional effects of divorce on what should be a pure business decision.

If such an agreement is not an option, it is important to realize the possible effects of each spouse’s involvement in the business on the final distribution of its assets.

Make sure to pay yourself a proper salary and not simply assume your share is reinvested in the business since your spouse may later claim that to have a share in that salary and therefore have a larger stake in the business.

The effects of a divorce on a business are not restricted to the actual share the other side might get. The effects of having part of the company owned by someone with whom you no longer get along may be difficult. If possible, you should try and reach an agreement whereby one party buys the other out to avoid further damaging the business.

When you own a family business, it is important to consult with a divorce attorney to protect yourself and the business if your marriage should come to an end.