The Five D’s: Divorce

“In every marriage more than a week old, there are grounds for divorce. The trick is to find, and continue to find, grounds for marriage.” –  Robert Anderson

In our last newsletter, I introduced the concept of the “Five D’s,” five major events that can create severe disorder in a business. These are:

  • Disagreement
  • Divorce
  • Distress
  • Disability
  • Death

It is imperative that owners have a contingency plan for each to give the business a fighting chance of surviving with the business intact. According to Web MD, the second item on our list, divorce, is also the second most stressful life event, wedged between the death of a loved one and moving to a new home.

The mental, emotional and financial trauma of divorce can create serious consequences insofar as how owners run their businesses, treat their employees and customers, and even pay their vendors. At the very least, it provides distractions that can keep your organization from running at peak efficiency; at its worst, the cost of divorce can drain the company coffers and drive it into bankruptcy.

Many owners don’t see it coming or think it could never happen to them.

Early preparation is the best defense, which may include a prenup, placing the business in a trust and/or creating a buy-sell agreement.

If looming or in process, with the court classifying your business as marital property (acquired during your marriage), it is important to maintain good records, get a fair valuation and, should you need to pay a court-ordered portion to your ex-spouse, arrange to make payments over time.

One piece of good news is that it’s unusual for a business to be sold off to satisfy a divorce settlement, as it would deprive the business owner of the future income needed to make support payments.