3 Effects of Divorce on a Business
Disclaimer: This article is only intended for educational purposes and shouldn’t be used as a substitute for legal advice.
Divorce has an effect on every aspect of your life, whether you can see it or not. When it comes to divorce, there is no disputing the emotional toll it can take, as well as the very real fear over what will happen to your personal property and financial assets. For company owners, who may already be under a lot of stress, these fears are sometimes magnified because they could lose even more if the divorce doesn’t go their way.
In fact, it is possible to keep your business running after a divorce and even grow it. It’s true that, like many business decisions, a successful divorce requires foresight and planning. Divorce can significantly impact your business, so it’s important to think about how it could be damaging.
Effects of Divorce on a Business
Couples who are happy in their marriage don’t give much thought to the possibility of a divorce. Although it’s important to keep an open mind, it’s even more important if you own or co-own a firm. The dissolution of a marriage can have a wide range of effects on a company. For business owners preparing for divorce, here are some of the most critical impacts divorce can have on your business.
The Division of Assets
In the event of a divorce, the split of marital property may have the greatest impact on your business. The Family Law Act mandates that partnerships, sole proprietorships, corporations and trusts are all examples of business interests that must be included in the marital estate of the spouse who manages them.
You may be required to sell your company to accomplish an equal or equitable divide. It’s not always ideal for business owners, so you may want to look into other options. To keep your business in your hands, you can try to work out a deal with your spouse that gives him or her access to other significant assets, such as your marital house.
Lack of Attention
Divorce is renowned for disrupting your usual business activities. It competes with you for your attention, diverting you from your duties as the founder, CEO, or shareholder. Moreover, the demands for documentation regarding your company, which can be time-consuming and distracting, means that usually, people are unable to give the proper attention to their business which can have several negative impacts.
Effect on Employees
Divorce may influence your business’s personnel, either directly or indirectly. Workplace tensions between you and your spouse might develop into a hostile work environment, leading to legal difficulties if they become unbearable. Employees may become agitated due to this tension, which could put your company in jeopardy of legal action because of the impact of relationship dynamics on the workplace.
Strategies to Protect Your Business
Although the impacts of divorce on business can be huge, there are some ways you can minimize these impacts.
Sign a Prenuptial Agreement
Making sure that a business started before the marriage is not subject to the marital division after a divorce is one of the most important aspects of a divorce. If a pre-marital business is depreciated or appreciated during the marriage, it should be clarified in the prenuptial agreement.
Separate Your Finances
Pay yourself an agreed-upon salary and establish separate bank accounts for your business operations. Your spouse may be entitled to a portion of the business if their or your shared money has been invested in it.
The impact a divorce can have on your business cannot be overstated. Divorce is capable of not only disrupting your mental, physical, and emotional wellbeing, but it can also enable your financial wellbeing.
At Nanda & Associate Lawyers, we are the best-rated Canadian immigration lawyers in Mississauga, and we have a team of experienced family lawyers that can assist in resolving property disputes and valuing businesses. They take the time to get to know you and your situation and then devise a plan of action personalized to your needs. Divorce can have a significant influence on a business, and an expert family lawyer can assist you in determining the impact of divorce on your business.
Book a consultation with us now and let us help you out with your case.
About the Author
The author is a credible divorce lawyer at Nanda and Associate Lawyers who have experience representing business owners, developing marriage contracts, prenuptial agreements and more. He has helped many families during this tough time and writes about how this process can be easier for everyone involved.