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How a partner’s divorce may impact your business

On Behalf of | Jun 19, 2020 | Family Law

In a recent post, we discussed some tips for protecting your business during a divorce. But what if the divorce affecting your business isn’t your own?

Even though you and your business partner may normally keep your personal and business lives separate, ultimately, when big events take place, it affects you both. This is especially true when a business partner gets a divorce. As he or she progresses through the divorce process, it could put your company at risk because businesses are often marital property.

According to Forbes, unless you have provisions in place to prepare for a divorce of one of the partners, there is a huge risk that you could see some serious effects in your business. There are a few different ways this could play out.

Losing your partner

Your partner may have to sell his or her interest in the business so the judge can divide the profits fairly in the divorce. If so, you may have no control over who makes the purchase. If your partnership agreement does not cover this, you are at the mercy of your partner’s decisions.

Ideally, your agreement will cover such a situation by giving you the chance to buy your partner out or at least have input in who can buy the portion of the business. Even if you do not have this agreement in place, your partner may still be willing to give you the first right to the purchase.

Gaining a new partner

Another possibility is that your partner’s spouse will receive some of his or her interest in the divorce. In this case, you may have a new business partner. Whether or not this is beneficial to you and your business depends largely on the spouse’s business sense and your ability to work together, and his or her level of involvement.

If your new partner does not want to play an active role in running the business, it could place a hardship on you since you may have to handle everything on your own. This may not be practical and could lead to the need to make further changes in the business.