Navigating Divorce in Your Family Business

Navigating Divorce in Your Family Business


Even in the most amicable of divorces, things get divided. You have to decide what to do with your house, your finances, and even your children’s schedules. But, when you’re in a business with your former spouse,  it can make evenly splitting your assets more difficult. 

So, what can you do if you have to split your business along with your marriage? How can you make sure all of your hard work doesn’t go to waste just because of divorce papers? 

You’ll have some decisions to make, including whether to close your business, let your spouse completely take over, or continue to work together. There really isn’t an ideal situation. But, by finding the right divorce lawyer and being willing to work through those ideas with your ex, you can find the best solution for everyone – including your family business. 

If you’re not sure where to get started when it comes to navigating divorce in your family business, we’ve got a few tips to keep in mind. The process won’t necessarily be easy, no matter what. But, knowing what to expect and how to work through it can help.

Continue to Share the Business

On average, it takes a small business 2-3 years to become profitable. Sometimes, it may take longer. You have to factor in startup costs, loans, and employee salaries. But, you also have to think about everything you sacrificed to get your business off the ground. Chances are, you spent a lot of time and energy on making your business work. You were obviously passionate about what you’re selling or serving, or you wouldn’t have started. 

So, even though divorce is hard, walking away from your business dream can be even harder. That’s why one option is to continue to share the business you started, even after the divorce. 

This is easier when you split on good terms. If your divorce was contentious and the marriage is truly broken, there need to be some ground rules in place for working together. Some tips to stay focused on your business, rather than your relationship include: 

  • Both agreeing to focus solely on the business, not on your personal lives
  • Maintaining professionalism
  • Making sure your employees are comfortable
  • Avoiding stirring up drama
  • Keeping any correspondence in person

This concept doesn’t work for everyone, but if you’re truly passionate about what you started with your business, it can be a great way to keep things going and maintain some sense of normalcy when everything else feels uncertain.

Leaving the Business

If you want the business you started to stay open but you’re not comfortable working with your ex, you might choose to leave. Of course, that means working out some sort of settlement. You might want to continue receiving a certain percentage of profits, or you might consider accepting a lump sum from your ex so they can buy you out of your half of the business. 

It’s also important to know how to handle your 401(k). Typically, during a divorce, 401(k)s are split 50/50. For example, if you made $50,000 during your marriage and put it into a 401(k), your spouse would usually be entitled to half. That can change on a case-by-case basis, depending on how your assets are being split. 

One of the best things you can do before deciding to leave your business is to consider your finances. Look over things like: 

  • Retirement accounts
  • Debt
  • Credit cards
  • IRAs
  • Life insurance policies

Understanding where you are, financially, will make a big difference in how hard you’ll fight for your half of a 401(k). 

While you might not be able to draw from your 401(k) right away, that’s no reason to forget it in your divorce settlement. There are many 401(k)s sitting in the retirement savings system. As of 2020, Americans had accumulated over $6.7 trillion in 401(k) accounts. Don’t let that money go just because you’re not in the same business anymore. Roll it over into an individual IRA, a new 401(k), or cash out your assets so you can start fresh. 

Starting Over

Speaking of starting fresh, that’s another option when you’re trying to get through a divorce and handle a business. Whether one of you decides to keep the business or close it completely, you can use this opportunity to start over. 

Starting a business is no easy task. But, you learn things along the way and develop skills you may not have had before. Those skills and experiences can help you to start a new business on your own or look for a new job. If you’re just starting in the job market after years of being a business owner, decide what it is you really stand for. What do you want the rest of your career journey to look like? Some tips to keep in mind when you’re looking for a new job include: 

  • Befriending recruiters
  • Using LinkedIn
  • Networking in person

When you choose to cut ties with your former spouse, choosing to cut ties with your business might be smart, especially if the divorce was difficult. With the right attitude and perspective, a career change can feel as freeing as getting out of a failed marriage. 

Whatever you decide to do, understand that navigating divorce in your family business needs to be about what’s best for you, not necessarily the business itself. Keep that in mind as you move forward and make the best decisions for the next chapter of your life.


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