Can you run the family business together after divorce?

Some people in Birmingham support their families by running their own businesses. It’s a great way for families to seek financial independence, but it can quickly become complicated if a marriage fails.

If you are considering divorce and started a business during your marriage with your spouse, there are likely going to be complications. Unless you have a prenuptial agreement or have taken special steps to protect your company, your ex could receive half of the company in the divorce. If you don’t think you will be able to continue operating the business together without issue after you divorce, you may need to start planning now.

Take proactive steps while building your business

Ideally, you and your spouse would agree on risk management practices that reduce the potential impact of a divorce on the business itself. Implementing these during the business formation process is usually the best option.

After all, the income for both of you, as well as the financial support for any children you have, comes directly from the business. Preserving the business in the event of a divorce ensures that at least one spouse continues to draw income from the company without concern about marital discord affecting business operations.

Maintaining the business as sole or separate property is often the best approach. If it is possible to fund the business with assets you had prior to marriage or through gifts from family members, that helps ensure that you are the sole owner of the business. Otherwise, since Alabama is a state that uses the equitable distribution standard, any funding that comes from marital assets could mean dividing the business during your divorce.

Consider negotiating with your ex

If your business is truly a passion project for you, your ex may not have much more than a financial interest in the business. He or she may be willing to sign off any interest in the company so long as you provide adequate compensation for it. Retaining a small amount of ownership status, generally less than half to ensure there aren’t deadlocked decisions, could also be a way to keep your ex out of daily business operations while allowing him or her to continue to draw some profit from the company.

In some cases, neither spouse feels like the other should have full control of the company. You may have to find a way to agree on the management of the business. It could be possible for the two of you to continue working together as long as you agree to leave personal issues out of the workplace. Only you know what your personal dynamic is and what your business is capable of withstandling.