Going through a divorce is hard enough. You are dealing with a major change in your life, working with attorneys, trying to figure out what comes next, and so much more. When you add a business to the mix, it can make things even more complicated. If things don’t go in your favor, there is a chance that you could lose quite a lot. Those who own a business and who are going through a divorce will want to understand how it could affect their business, so they can come up with some strategies that can make things a little easier.
Of course, it’s still possible to get divorced while owning a business without the business suffering. With some planning and help from an experienced attorney, it can reduce the risk of major complications. It’s also important to understand some of the big factors that often come up during a divorce that could affect the business. So, how can a divorce hurt your business? Let’s get a closer look at these below.
Divorce Can Affect the Assets
Is the business a marital asset? Did you start the business with money from the community funds? Was the business something you started on your own before you got married, and did you keep community funds out of the business entirely? If it is considered a marital asset, chances are that it will be treated much differently than a business that is entirely separate.
Of course, the lines here can often blur, and it may not always be easy to determine what marital assets have become co-mingled with non-marital assets. For example, if you have a business that was separate property that you started before getting married, and you later used marital assets to help keep the business running, the business will lose its separate identity.
If it is considered marital property, the business will have to be divided equitably between the spouses in Arizona since it is a community property state. This could mean needing to buy out your spouse’s portion of the business assets they would be owed. You could also offer other assets in the marriage to make up the difference.
It might also mean selling the business and splitting the profits, but this tends to be the least desirable option. After all, you spent a long time building your business. You don’t want to be ordered to sell it.
Ideally, you will keep your home and business finances separate from one another. This can help to eliminate confusion regarding the business. Of course, if it is already too late, you will want to talk with an attorney about your options.
The Spouse Might Claim to Be the Reason for Your Business Success
Sometimes, your spouse will claim that the only reason you have a business is because of their help or their sacrifice. Maybe they helped to pay to get the business off the ground, or you used marital funds to start the business. Perhaps they pitched in and helped with various needs at the company. There could be any number of scenarios where your spouse might have some claim to the company, or at least to part of it.
In cases like these, you and your spouse will have to determine how much is owed, if you can agree. This is often not possible, and it might come down to a decision of the court.
This is something that you will need to anticipate, so you can plan your strategy. If they were paid for the work they did, for example, they might not have a claim. However, this can get tricky, and it’s best to have an attorney run through the scenarios with you to get a better idea of what will happen.
Changes in How the Business Is Run
If you and your spouse co-owned the business, getting a divorce is likely to change the leadership structure in the company. In some cases, you might be battling with your ex for the right to own the company. Think of the problems this can cause. Being around one another and other employees can be awkward, to say the least.
If your spouse leaves the business, it will generally mean that you have a lot of extra work that you will now have to do.
What if you and your spouse remain co-owners of the business? This can work out in some cases. Perhaps you are good at being business partners, but you are terrible at being married. It could be possible to still work together in a professional setting. However, it may be a good idea to create a new partnership agreement that defines roles and responsibilities in the business, along with ways to resolve issues that come up.
Your Health and Wellbeing
Divorce is stressful. So is running a business. When you are trying to deal with both of these things simultaneously, your mental health can start to decline. As levels of stress rise, issues like anxiety and depression are bound to rise. It can become hard to maintain a good work-life balance.
You will often feel more distracted, and it will be difficult to focus on the business. It can affect your confidence levels and your ability to make decisions. This can slowly start to erode your business if you let it.
The best way to handle this is to make sure you provide yourself with some time each day to take care of yourself and to revitalize yourself. Maintain a workout schedule, spend time relaxing, and consider meeting with a therapist. Sometimes, just having someone you can talk to about everything that’s going on in your life will help.
It is also a good idea to get someone to help you with all of the parts and pieces of the divorce that need to be handled. It can be a lot of work and working with an attorney can help to reduce a lot of the stress and uncertainty that you are feeling at this time.