If you have a family business, you will want to have a plan in the event of death or divorce of any of the partners. Not only will you need to plan – but you will need to plan early. Valuing businesses and determining which percentage will be awarded to the non-owner spouse in a divorce is very costly and time consuming.
There are several “tools” that business owners can use to avoid common problems:
1.) Prenuptial Agreement. The single most effective tool is to deal with the issue while a couple is on good terms. In a best case scenario, the non-owner spouse will waive any interest in the business. When negotiating a pre-nuptial agreement, it is essential that both parties have counsel of their own, and that there is full disclosure by both parties.
2.) Spousal Waivers. Another effective tool, is to have your spouse sign a waiver that he/she will waive any ownership in a company.
3.) Buy-Sell Agreement. A buy-sell agreement typically contains a plan to purchase an owner’s share in the event of death or divorce. Another benefit of a buy-sell agreement, is that it will generally include a mechanism for valuing the company, if a non-owner spouse is entitled to a certain percentage.
For more information on the intersection of businesses and divorce, contact our office at (586) 264-3756.