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The effect of a divorce on your business

by | Oct 1, 2021 | Divorce

Marriages are not the only partnerships that can end when a divorce is made final. Sometimes, a family-owned business could be vulnerable as well. This is especially true when a married couple has built a business that is not necessarily growing as anticipated or has fallen on hard times in Pennsylvania. Many have actually ended in bankruptcy along with a divorce in worst-case scenarios. However, some businesses can endure the separation when operational input cash flows are steady and credit lines are still open. There are a few options that divorcing couples may have if they stay amiable regarding their business venture.

Settlement buyout

One of the first options in a business divorce is one spouse selling their ownership share. This works well when one partner wants to keep the business in operation and the other wants a payoff. This arrangement can be included in a final agreement following an effective mediation process concerning all asset and liability distribution. However, there can be situations where the remaining business partner will need to borrow operating capital when the payoff is substantial, or they may even take on a new financial or business partner in some situations.

Installment agreement

One of the most practical agreements for divorcing couples who own a business is an installment payment agreement. The continuing management spouse will pay the leaving spouse in most scenarios, but the dynamics of the divorce process and the amount of marital or personal assets can control this decision. Installment payments can be viable when one partner wants to continue a very successful business.

In addition to these two potential arrangements regarding business marital property, the option to continue the business as partners is also a sound decision in amicable divorce cases. Lives go on following a divorce, and income is a necessity of life. Divorces are not always ugly, and maintaining perspective is always best. Some couples can continue to own their share of an ongoing business when the generated income is acceptable to both parties.