This is Todd Burnham, the Founding Partner of Burnham Law, and an experienced family law lawyer with a superb record. This blog talks about what you can do to protect your business while going through a divorce.
So you own a business, and you’re going through a divorce. What do you do? First, you need to sort out a few things with your lawyer. Is this a viable, profit-driven business? Or is it a hobby?
Get a Valuation
You need an expert report to base your bargaining position on, that way you aren’t negotiating with yourself. You have the hard numbers, and you know precisely what the business is worth.
When to Walk Away
If what you’re dealing with is lower numbers and it’s not a moneymaking business, then walk. The smartest thing you can do in this case is getting the opposing party to pay the value of the business (or settle it), then you walk away, having not lost much. There’s no point in fighting tooth and nail over something that doesn’t have a whole lot of value.
Another factor to consider when deciding whether to walk away or not is who you’re dealing with. Is your former partner a reasonable person who can conduct business with you in an unemotional way? Then great, you guys can split it down the middle and keep working together. But if you’re dealing with a narcissist, you’re going to have to sell it. But if you put your heart and soul into this thing, and you both are better business partners than you are marital partners, then you can operate like that and hopefully agree better than what you have up to this date.
What to do When you Can’t Agree
If you can’t agree on the split, a court is typically going to say, “All right, sell the business and split the proceeds.”
It’s all about the experts and your intuition. If you believe in your heart that this thing is a home run, then you fight. And you outline how much you’ve invested in it. But if it’s not, you should try to get a business valuation that values it at fair market value or something higher than what you believe it to be.
And if not, don’t be afraid to get a second business valuation and then give it to him or her. And if you do that, then you are going to get three benefits:
- No Headaches
- It’s no longer your fault for whatever’s happening with the business.
- You get a bargaining chip. Maybe it’s one of these things where you say, “Okay, you take the business, I take the house.”
Everything is negotiable. But he or she who speaks first, typically loses, and so you don’t want to negotiate against yourself. And the way to do that is to know the numbers and know the data before anybody else does.