One of the most overwhelming issues in a family business is divorce between couples. Even without a family business, divorce can be devastating. When the two are tied together simple issues can turn into serious complications.
Marriage in the United States fails 50% of the time and the statistics on second marriages are worse. As for family businesses, only 30% are passed on successfully from the first generation to the second, 12% from to the third generation and 3% to the fourth generation. Divorce is a strong influence to these statistics. There are several strategies and legal processes that can be done to alleviate these complex dilemmas.
Pre-nuptial agreements will not prevent families from divorce but they can help minimize the financial affects. Very few marriages use these agreements not because it’s a bad divorce strategy but because they are afraid and hesitant about having the conversation before getting married.
The family business is regularly the largest asset owned by the family. When there is a divorce the business is usually sold because it’s almost impossible for the business to survive in a hostile environment. There a numerous options but the proceeding being divided between the two couples is what usually occurs.
It us also important to consider that family is not the only party affected, but employees as well. This is common in small medium sized family businesses. These employees are treated as extended family who tend to participate and voice their opinion without hesitation. Family business and divorce is such a large threat that having representation and strategies to these threats is something every family should consider.
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Surviving divorce is a challenge in itself, but did you know that divorce is also one of the leading causes of bankruptcy today? As a divorcing party, if you are not careful, a divorce can burn through all of your assets and leave you with nothing but debt.
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