Sometimes a business owner will refer to the business as "my baby." In a divorce action, the potent combination of financial security provided by a family-owned business, and the emotional attachment to this additional "baby" in the family, can derail both the family and the business.
It doesn't have to be that way. It is possible to address openly and honestly how to fairly compensate both spouses in the property division and support award without destroying everything the family has built.
While most divorces involve two spouses, when there is a family business, there are usually many unnamed parties to the divorce: the founder, a trustee of shares held for family members, non-family owners, lending institutions, in-laws who are employees of the business, and dependents who rely on the business for health care benefits and support. Decisions made by the divorcing spouses can affect all the unnamed parties.
Each family presents unique facts, but many questions asked are universal to most divorce cases.
- How long will the divorce take?
- How much will the divorce cost?
- Are all assets, including my business interest, included?
- Do we have to divide each asset and debt equally?
- How do we calculate child support? Spousal support?
- How do we find out how much our assets, including my business, are worth?
- Do the business agreements between shareholders control what the judge in a divorce can decide?
- What if all or part of the business interest was a gift or inheritance?
- What if the business is cash poor but has a high value for its assets? How do I pay my spouse half the value of the business?
- Can the court force both spouses to work together after divorce?
- Can the court force the sale of the business?
- Can the court take into account that we wanted our children to eventually take over the business?
- What if it's always been my family's business, but my spouse is the CEO?
- Do we have to go to court where the public can attend?
Avoiding a contested public trial before a judge is usually a high priority, but trials do happen. Often, after a couple has prepared for trial, they discover they are able to resolve the issues with the help of a mediator. Often, couples choose private resolution through a combination of mediation and arbitration in a private setting, where no public record is created.
In this blog space, I will explore the issues and questions that arise when a divorce involves a family business or an interest in a privately held business. Within this topic, I will share information and advice on how to traverse this challenge to the harmony and success of a family’s business interest. I will also discuss ways to plan and prepare for some of these challenges before marriage and before a family member becomes an owner. Finally, I will consider how parties can use this event as an opportunity to engage in estate and business planning. I will sometimes invite others in this field to contribute their expertise.
I hope you find these topics as interesting as I have during my 36 years in private practice.
Attorney Linda S. Balisle is the founder of Balisle Family Law Legal Counsel, S.C., a full-service family law firm in Madison, Wisconsin, with a statewide practice. Attorney Balisle serves as both advocate counsel and mediator in divorces involving business owners and high net worth individuals.