Running a small business can be a demanding career path. Franchisees and professionals with their own practices often have to work far more than 40 hours per week to keep their companies profitable and competitive. Owning a business can make it difficult for people to obtain mortgages and can complicate income tax returns.
Business ownership can also create a variety of challenges for people intending to divorce. If one spouse owns a business, divorce negotiations or litigation are likely to be far more complex because of their career choices. What common complications arise in divorces that involve business owners?
1. Concerns about ownership
The spouse who currently owns and runs the company may expect to continue doing so until they sell the business or retire. They may want to ensure that they do not have to share ownership with the other spouse after the divorce.
Negotiating to retain sole ownership of a company can be a complex process. Business owners need to be ready to compromise and often need to gather financial documentation to validate any offers or suggestions they make.
2. Challenges related to employment
Sometimes, both spouses work for the same business. They might both be accountants and may share their ownership interest in the organization. Other times, one may fill a leadership role while the other performs support services.
Sometimes, spouses can make arrangements to continue working together and running the company jointly. Other times, the spouse who intends to retain the business must make arrangements for the other to transition out of their current position.
3. Worries related to financial support
Some professionals who run their own businesses use their control inappropriately. They reduce how many clients they take on or engage in under-the-table bookkeeping to reduce their reported income.
They do so to sidestep financial support responsibilities for a lower-earning spouse or even their own children. Business owners may face more scrutiny in scenarios where their income drops during or after a divorce. They may end up accused of intentionally reducing their income in a bid to minimize their financial obligations.
Recognizing that business ownership can be a complicating factor during divorce can help people prepare for possible disputes before they arise. Business owners who set appropriate goals and focus on addressing common issues can theoretically divorce with more dignity while better preserving their most valuable assets.