How Divorce and Separation Can Impact Small Businesses

For small business owners, many different aspects of their personal and professional life can impact their company’s success. And when it comes to the former, divorce and separation can prove to be one of the most difficult to overcome.

The life of a business owner is full of ups, downs, and a lot of hard work to both establish and maintain a successful company.

Small businesses don’t have the resources and financial backing of a larger enterprise. Therefore, situations that influence productivity and profitability can prove to be catastrophic. Although divorce and separation may not directly affect your chosen industry, on a personal level, they can be a very challenging experience.

In this post, we’ll take a look at a few ways divorce and separation can impact a small business.

A Costly Divorce Is Costly for Your Business

When it comes to divorce and separation, especially the former, there’s always a fear of how significant the financial repercussions will be. With matrimonial assets being divided, legal fees to pay, as well as any direct financial effects on your company (such as liquidation of assets) — there is always the potential to suffer losses during this period.

How much your divorce costs depends on a number of factors. The divorce process itself can be made to be substantially less costly if you and your spouse can agree on the terms of your settlement, therefore avoiding court. While this is not always possible, if you can achieve this through bespoke law services and mediation (if needed), you will both save a lot of time and money in the process.

Your Spouse May Be Entitled to a Stake in Your Company

The court does its utmost to ensure that there’s an equal starting point when dividing assets. As a business owner, it may be possible to put forward arguments to dispute the presumed 50/50 split. You have a better chance of doing so if you established the company before you met or married your spouse.

To begin, you will have to value your company’s assets. Although this initially can be handled by your regular accountant, you may need an independent forensic accountant if your spouse disputes asset values. Once this has been established, you then need to agree on the percentage that your spouse will receive.

In some cases, this may well be 50% but it can vary. If it does differ somewhat, the court can consider liquidation and attempt to determine if the business can sell anything to repay the agreed amount. The majority of the time, this will be funds or property that the company can continue to operate without.

Reduced Productivity and Motivation

For a startup or small business to enjoy long-term success, you can expect there to be many long days and hard work that demands a no-quit attitude. Unfortunately, it’s extremely difficult to be your most productive and motivated self when you are in the midst of challenging ordeals such as divorce.

If you were an employee of a company there would be less concern in this regard, as there would be HR professionals to assist you with solutions to take time off. But for a small business owner, if you aren’t able to work or the quality of your output wavers, your company could find itself in all kinds of trouble.

If you are a solo operation or have a small number of employees, the result of you struggling to show up for work (both physically and mentally) can directly impact your financial gain, customer relationships and brand reputation — all of which are crucial for small businesses to survive in highly competitive markets.

Protecting Your Business

Due to the complexity of divorce combined with the individual personalities involved, it makes for quite the unpredictable process. Therefore, your first step should be to seek bespoke law services and shop around for a family lawyer that suits your needs. By doing so, you ensure that the best possible person is handling your case and provides you with critical knowledge to make intelligent decisions.

If you and your spouse are on good terms and both are prepared to resolve the matter fairly, you have a much better chance of keeping your business intact. Failing that, many people in this situation will offer unessential business assets (liquidising) to cover the cost of what they owe.

If you are unable to agree on the terms of your divorce and fear that a court case could cause irreparable damage to your company, family mediation is another solution that many divorcing couples benefit from. This is where you both meet with an independent party to discuss the terms of your divorce and reach an agreement that’s fair and acceptable by you both.

This process can prove to be essential for removing the hostility and ego, and replacing it with clear-thinking and logical decisions — if your goal is to protect your company, you definitely want to adopt the latter.

Author Bio

KMJ Solicitors is a specialist family law firm based in London, their team offers bespoke law services related to all areas of family law — including divorce and separation, child law, prenuptial agreements and dealing with financial matters.