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What happens when business partners divorce?

According to the Small Business Association, small businesses account for roughly 54 percent of total U.S. sales and employ 55 percent of the U.S. workforce. Many entrepreneurs spend years sacrificing and working hard to grow their businesses. For those business owners who are married, a spouse may play the role of business partner, executive or financial investor.

In cases where a business is thriving, but a marriage is not; both spouses are likely to have questions and concerns about how a shared business factors into and will be affected by a divorce. When possible, married couples who plan to start a business together are advised to take steps up front to safeguard a business and to make decisions related to ownership in the event they subsequently divorce.

When forming a business, taking the time to consult with an attorney and clearly define issues related to roles, responsibilities and ownership can make the divorce process much easier with respect to dividing a business and related assets. Of course, divorce isn't even on the radar of many couples who enter into business together which means that such matters must be addressed in a divorce settlement.

Ideally, provided both spouses are happy with their current business arrangement, from a business standpoint, it's often best to maintain the status quo. However, this type of arrangement only works in cases where divorcing spouses are able to set aside their personal issues and focus on a business' success.

More often, divorce signals the end of a business partnership between spouses. To ensure for a business' future, one spouse may opt to buy the other out or spouses may work out some other type of profit-sharing agreement. In cases where divorcing spouses aren't able to resolve issues related to how to divide a business, they may be forced to "liquidate the business and split the proceeds."

Couples who own a business and plan to divorce have many unique financial and other concerns. It's important, therefore to consult with an attorney who handles high-asset and complex divorce cases.

Source: The Wall Street Journal, "How to Keep a Business Alive After a Divorce," Andrew Blackman, Jan. 24, 2016

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