Divorce Can Affect Business Partnerships
Business partners are sometimes surprised to learn the effects on the business caused by a personal divorce with one of the business partners.
Ending the Partnership
In some cases, the business partners themselves may have be the spouse. When the marriage ends, there is a distinct possibility that the partnership may also end. If the partnership does terminate, one of the spouses may decide to buy out the other spouse. The person who is leaving the company would receive a monetary sum or a percentage of the profits earned at the time of their departure.
At the same time, the partners may mutually agree to end the business during the course of the divorce. If this scenario occurs, then several elements may come into play. First, there may be a pre-nuptial agreement in place that dictates how all business assets are divided. If no prior agreement is in place, then all company assets would be divided under the concept of community property where each individual would receive half of the profits of the company. However, the ex-partners would also be equally liable for any liabilities that the business has (such as any outstanding debt or loans).
Another possibility is when business partners are not married but one of the partners divorces their spouse. When this happens, the ex-spouse who is not part of the business could be entitled to a portion of any profits if and when the partnership does dissolve.
Conclusion
It can benefit the married business partners to consult a business attorney when there is a pending divorce that could affect a company. The lawyer can review the available options for both parties and explain the benefits and drawbacks for the individuals. An attorney may also be able to explain what the best way would be for a couple to proceed with their organization (such as having an agreement in place prior to beginning the company or permitting the division of assets based on community property). The lawyer may even be able to assist with drafting an agreement if the partners choose to follow that route.