Divorce can be an emotionally taxing process, and for small-business owners, the added stress of potentially jeopardising their business can be overwhelming.
With limited resources and manpower, it is crucial to handle the situation with diligence and care.
Here are some essential steps to help small-business owners navigate through a divorce while striving to protect their enterprise.
1. Seek specialised legal advice: First and foremost, securing good legal advice is paramount. Lawyers who specialise in divorce and have experience with business ownership issues can be invaluable. They understand the intricacies involved in evaluating and dividing business assets. A good lawyer will help you understand your rights and the potential outcomes of your divorce proceedings.
2. Inform your accountant and work closely together: Your accountant plays a pivotal role during this time. They can provide detailed financial information and help you understand the financial health of your business. It is essential to advise your accountant about the situation so they can prepare for any requests for documentation or valuation. Their expertise will be crucial in presenting your business finances accurately.
3. Organise your financial documents: Gathering and organising all financial documents is crucial. This includes tax returns, profit and loss statements, balance sheets, and any documentation related to business debts and assets. Having these documents readily available will streamline the process and assist your lawyer and accountant in giving informed advice.
4. Discuss valuation with your lawyer: Before you get anything valued, talk to your lawyer. Business valuation in a divorce can be complicated, and the timing of the valuation can significantly impact the perceived worth of your business. There is a specific process to be followed to ensure the valuation can be used and you want to avoid paying for a valuation that cannot be relied upon.
5. Explore alternative dispute resolution options: Litigation is expensive and can deplete both your personal and business resources. Mediation may save you time and money and offers a more private and controlled environment where you and your spouse can work out the details of your property settlement, including the fate of your business.
6. Protect your business with prenuptial or postnuptial agreements: If possible, proactively protect your business with prenuptial or postnuptial agreements. These contracts can define what will happen to your business in the event of a divorce, thereby potentially simplifying the process if it occurs. They can be done prior to commencing a defacto relationship, getting married, or after those events.
7. Stay professional and keep business operations running: Maintaining professionalism is vital. Your employees, customers and partners should not suffer due to your personal issues. Keep your focus on day-to-day operations and ensure your business remains functional and efficient.
8. Consider creative settlements: Rather than splitting the business, consider alternative settlements. This might include offering other assets in lieu of the business or setting up a payment plan to buy out your spouse’s share over time.
Divorce for small-business owners involves a delicate balance of personal and professional interests. By securing knowledgeable legal and financial counsel, organising your documents, and considering creative settlement options, you can navigate your divorce without sacrificing the business you’ve worked hard to build. The key lies in proactive management and informed decision-making, ensuring that both your personal and business futures are protected.
