The biggest business risk that everyone overlooks is the one that starts at home. Here's what to do if your marriage cracks.
Risk? As an entrepreneur, you can handle it. Recession, loony regulation, stingy lenders, and litigious customers—you're ready for them all. But are you prepared for the risk that the person who sits across the breakfast table from you might one day be sitting across the table in an attorney's office?
Probably not, and why should you be? Your focus has always been on growing the business and keeping it profitable. Divorce isn't something anyone thinks about unless there's a strain in their marriage.Best Protections
That said, the best protections are the ones you put into place long before any hint of a need appears: namely, pre-nuptial or post-nuptial agreements, shareholder or partnership agreements, employment agreements, and buy-sell agreements. We won't go into the details of each right here, but the fact is, your business may be fair game in a divorce settlement even if your spouse had nothing to do with establishing or running the business. A lot depends on when the company launched and what assets were used to start it–as well as on your state's property laws, of course. As a result, if you are about to get married or launch a business, you'd be crazy not to avail yourself of these safeguards.
In reality, however, you probably won't have given a moment's thought to what impact a divorce could have on your company until your spouse serves you with the papers. What do you do then?1. Get an outside valuation
It’s important to get a realistic present-value evaluation of your business. You may feel confident that you can “guestimate” the value, but it is necessary to get multiple outside (and unbiased) appraisers. The recent recession likely took a bite out of your company's value, even if it is sound and profitable. That's in your favor during a divorce. Using an outside expert’s valuation will also help move things along more quickly in negotiating a divorce settlement.2. Hire specialists
Work with a family law attorney and an accountant who has a lot of experience with business owners. Avoid generalists. There are many road blocks in the divorce process and it’s crucial that your advisers have the experience and expertise to protect your business at every step.3. Don't play games
Don't hide assets or pad losses in the year leading up to your divorce. Avoid making major investments or incurring bigger one-time expenses during the divorce. Operate in good faith and provide full disclosure, which will expedite a settlement and avoid any possible sanctions and additional fees. You want the business to continue to succeed, even if your no-good ex-spouse enjoys part of the benefit.4. Don't lose focus on your business.
A divorce can be emotionally draining for you and it’s important to give yourself a break and some time away. However don’t lose the motivation that brought you success in the first place. If your soon-to-be ex-spouse is still financially tied to the future income stream of your business, it's easy to be bitter. But that doesn’t solve anything. The situation isn't great. But you have to make the best of it.5. Be ready for the unexpected.
This one is right in your wheelhouse. You expect the unexpected in your business. You should do he same during the divorce process.
Matt Mikula CFP, CDFA contributed to this article
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