Starting a business with your long-term partner might seem like a dream come true for most New Jersey couples. But running a business with the person you’re divorcing could be a nightmare.
Splitting the business in the divorce
Depending on when the business was started, if it’s owned equally by both parties then it’s considered joint property. That means that it will be split one way or another in the divorce, even if both parties want to continue to own and operate the business.
Sometimes businesses are valued and then sold, with the profits being split amongst both parties. Other times, one spouse is willing to leave the business behind under a few conditions.
If one party leaves the company
When one party chooses to leave the company, it’s usually under the condition they get paid a certain amount based on what the company is worth. The spouse who is staying as a sole owner will want to make sure that the leaving spouse transfers all ownership in the divorce.
In these transferring documents, they’ll want to explain what the leaving spouse isn’t entitled to. There will also be mutual release forms that release each other from all responsibility or liability from that day forward.
The staying spouse should also look into non-compete restrictions and other ways to protect their intellectual property. The goal should be that the leaving spouse is able to procure work without impeding the business’s ability to turn a profit.
Additional tips for the leaving spouse
The leaving spouse will want to get this documentation as well, just to protect themselves from further responsibility or liability for the business’ success (or failure). In addition to the release document, the leaving spouse should consider insurance protection to further protect them from lawsuits related to the business in the future.
Just saying they’re not affiliated with the company anymore might not be enough to save them from liability for things that took place before the divorce. And in the non-compete documents, they’ll want to ensure they’re not handicapped from making money going forward.
Splitting from your partner is messy and painful but splitting the business doesn’t have to be. Following these tips can help protect your business during the divorce process.