Family Businesses in Dissolution or Legal Separation Matters

Going through a divorce or legal separation can be an emotional and stressful time due to the variety of issues involved. However, when a family business is involved it can be especially difficult. Whether the parties work together at a business or are co-owners of a business, it may cause the case to get fairly complex. Fortunately, there are steps both parties can take to ensure an efficient resolution.

During the course of a separation, communication can get strained and the parties may refuse to communicate with each other. However, when a family business is involved, it is important for both parties to continue communications about the business to ensure that it is being properly run. The parties have a fiduciary duty to each other in marriage, as well as in a business, and they must comply by those duties. This requires open and clear disclosures of things pertaining to the business. This helps both parties work towards amicable settlement, and keeps the divorce process moving towards resolution and cost effective.

While tensions may run high during a divorce, it is important to ensure that the business is prioritized. During the course of a divorce and specifically in cases in which parties work together at a family business, the emotionality of the divorce may cause one or both parties to make decisions that may be detrimental to the business. It is important to remember the business should always come first. Adjustments also may be made to help prevent stressful or tense situations. For example, the parties may set up a work schedule that may avoid both parties being at the business at the same time.

Both parties must remember to continue running the business as efficiently and as successfully as possible. It is also crucial for both parties to remember that the business is a source of income for both parties. For this reason, risking the business in any way due to the tension caused by the divorce is never worthwhile and may result in a breach of fiduciary duty claim. When making decisions regarding the business, focus on the financial needs of the company, and its historical practice.

As to the actual division of a family business, there are many various ways to approach it, and it will be determined based on the specific facts of each case. One option may be a buyout by one party, which may be desired if the case is highly contentious. This will require a business valuation. Another option may be for the parties to continue working together, but make adjustments to ensure that the business continues working for both parties. There are a variety of other options in which an attorney would be able to advise you as to what the best approach would be best for the facts of your case.

Navigating the legal aspects of how a family business may impact your divorce process can be very confusing and may seem overwhelming. We at Mello & Pickering LLP have over 40 years combined family law experience and can help you navigate the issues surrounding the impact a family business can have during your divorce or legal separation, including any issues pertaining to you and your spouse’s fiduciary obligations, and can guide you to obtain a business valuation if one is needed and provide your options for division of the business. Call our office for a consultation and we can help to ensure that your interests are protected and assist you in navigating through the process of your case.