Successful entrepreneurs know the hard work and dedication it takes to build a thriving business. But often, insufficient time has been spent protecting a business from the potentially devastating impacts of a divorce.
The following list offers some sound advice to help you – and your family business – make a successful transition.
Draft a pre-nuptial agreement. Open and candid discussions are actually easier to have and are better received early in the relationship than they are later. It’s not about denying anyone of their fair share, but making sure there are clear parameters up front. The agreement can also allow for jointly chosen, pre-selected experts and a defined method to value the business. If it’s a family business, the spouses can also plan who will operate the business if there is a separation.
Keep it out of court. Aside from being extremely costly, going to court takes control out of your hands and should only be considered as a last resort. Your personal and sensitive family disputes, and business information, becomes public. More importantly, judges have the power to order share transfers, a forced sale of the business and, in some extreme cases, issue freezing orders. It can also be further damaging if there are children involved.
Cooperate. No one wins when there is a fight, so it’s better to find a mutually beneficial solution, ideally through the use of mediation or collaborative law. In these private out-of-court systems, issues around taxes and finances associated with a potential transfer or sale of corporate or personal assets can be addressed constructively. For example, you can learn to find payment methods that minimize tax implications, use one trusted business valuator for the team to minimize cost or conflict, or create a transition plan for the business if it is no longer possible to jointly operate it after a separation.
Think outside of the box. “Interest-Based Negotiation” is a Harvard negotiation model that offers creative solutions that may fall outside of the traditional legal model, but which may be better adapted to the specific needs of your business and situation. Examples of creative thinking include delaying a capital payment to address cash flow issues, or, if it’s a joint business, continuing to co-own for a period of time with clearly defined roles to ensure a smooth transition. Collaborative negotiations use this negotiation method.
Nathalie Boutet is a leading Canadian family lawyer and Mediator who specializes in high net worth families and those with a family business. She is also a Deputy Judge in Small Claims Court, a popular public speaker and subject matter expert with various media. To learn more about Nathalie click https://www.thedivorceangels.com/vendor/nathalie-boutet/.