Joint Ownership of a Business After a Divorce
Many people are familiar with the challenges of co-parenting after a divorce, but what about running a business together? For many New York spouses, shared commercial ventures are among the most contentious things they face when untying the knot. Many may wonder about their options when it comes to a shared business, and whether continuing to run a lucrative business together despite the divorce is a good idea. Below, we discuss factors in considering how to divide business ownership after a divorce.
Challenges of Joint Business Ownership with an Ex-Spouse
Joint business ownership can be challenging for partners of any kind. This difficulty is even more pronounced in cases where the owners are ex-spouses. While maintaining a professional relationship for the sake of the business is ideal, personal history and emotions can complicate matters. Some key challenges that former couples may face when continuing to run a business together include the following:
- Communication difficulties due to past relationship issues: Former spouses may struggle to maintain open and effective communication. Unresolved personal conflicts can lead to misunderstandings or avoidance of important business discussions.
- Conflicting management styles or business visions: Ex-partners may have developed different ideas about the company's direction or day-to-day operations. These divergent viewpoints can lead to frequent disagreements and gridlock in decision-making.
- Struggles with separating personal feelings from business decisions: Emotional baggage from the past relationship can cloud judgment on business matters. This can result in decisions being made based on personal grievances rather than what's best for the company.
- Potential impact on employee morale and company culture: Staff may feel caught in the middle of tension between the ex-spouses. This can create an uncomfortable work environment and potentially lead to decreased productivity or increased turnover.
- Complications in financial management and profit sharing: Dividing profits and managing finances can become contentious, especially if there are lingering issues from the divorce settlement. Disagreements over salaries, bonuses, or reinvestment strategies may arise.
- Difficulty in presenting a united front to clients and partners: Personal disagreements can spill over into professional interactions, potentially damaging relationships with clients, suppliers, or investors. Maintaining a consistent and professional image becomes challenging.
- Challenges in making major business decisions collaboratively: Important choices about expansion, pivoting, or selling the business can become deadlocked if ex-spouses cannot find common ground. This indecision can hinder the company's growth and adaptability.
- Potential for new romantic relationships to affect business dynamics: When one or both ex-spouses enter new relationships, it can introduce jealousy, competition, or further communication barriers into the business partnership.
Tips for Those Remaining Co-Owners of a Business
There are a few things co-owners of a business can do to keep things running smoothly in spite of a divorce, including:
- Assigning clear and separate responsibilities is typically a good idea, as is developing a forum for conflict resolution.
- Keeping boundaries regarding what is appropriate to discuss in the business and making sure professional lines do not get crossed is also important.
- Developing a comprehensive partnership agreement that reinforces the terms outlined in your property division settlement.
- Implementing a decision-making process that is fair to both parties.
- Respecting each other’s strengths and authority in your assigned roles.
- Ensuring you have a shared vision and alignment on long-term goals.
Shared businesses can be a source of great wealth or great conflict for families. Those who cannot handle their partner sharing a business with an ex should think twice before getting too involved. New York individuals going through a divorce and wondering about the future of a shared business can also seek advice from a family lawyer.
Alternatives to Joint Ownership
Whether due to differing visions, personal circumstances, or financial considerations, there are several options available when joint ownership is no longer desirable. Consider the following alternatives:
- Buyout: One partner purchases the other's share of the business.
- Bringing in a third party: A new investor acquires one partner's stake.
- Liquidation: The business is closed, and assets are distributed.
- Management buyout: Employees or managers purchase the business.
- Partial buyout: One partner reduces their ownership percentage.
- Selling and splitting proceeds: The business is sold, and profits are divided.
Each of these options has its own set of advantages and challenges. The best choice will depend on the specific circumstances of the business and the goals of the current owners.
Talk with Our Formidable Divorce Attorneys
Since 1983, Arnel Law Firm has been helping our clients understand their options in their divorce and property division cases. Whether you need us for our negotiation skills or trial experience, we can help you determine what course of action you should take (i.e., continued joint ownership or an alternative) and the course forward to achieve a favorable outcome.
To discuss your case with our team, call (718) 550-3024.
