Breaking Up

Breaking Up is Hard to Do:
Divorce in the Family Business

Divorce has financial ramifications in every family business, and emotional ones in every business family.

While legal strategies, succession and tax planning can minimize the monetary effects on the business of a marital break-up, anticipating its impact on relationships, morale, and even performance in the workplace is an important consideration, too.

When both spouses have been actively engaged in the business, their impending divorce may not come as a surprise to their closest colleagues; if the atmosphere in the office has been tense and the rumors flying, it may even be a relief. But like the children of any divorcing couple, what the staff, employees, and perhaps even the clients and customers want to know is, How will this change things around here? What meaning will this divorce have for me?

No matter how people involved in the business feel personally about the divorce or the parties to it, they need to be assured that their own jobs, contracts or arrangements are secure and the business is sound.

Although sharing the details of the divorce isn’t necessary, or even advisable, letting key staff and employees in on anticipated changes in management or operations is. If you’re realigning responsibilities, divisions or portfolios so that both spouses can continue participating actively in the business, but in different arenas, spell out the details to those who will be affected by them.

It’s hard to go on with “business as usual” during or after a divorce if other family members, employees and even some long-time clients or customers feel pressured to take sides. This is especially true when spouses continue to operate the family business together even after their divorce, as 10% of them do. Such arrangements meet with varying degrees of success, for varying lengths of time; much depends on how and why the marriage ended, and what the business means emotionally to each partner.

If one spouse is leaving, even those staff members and employees who aren’t consciously aware of feeling loss, grief, anger or resentment may express their emotions in other ways – for example, increased absences, decreased productivity, and disturbances in office relationships and loyalties. Without a chance for closure – an opportunity to say a personal as well as professional goodbye to a former boss, friend or colleague - these feelings can linger, fester, and affect performance.

When former spouses continue working in the same field, business or practice, not as partners but on their own or with other associates, the details of who keeps what (including clients and customers as well as other assets) will be spelled out in the dissolution documents, both marital and corporate. All family businesses, like all relationships, are worth not only their value at the present time but the value of their future expected benefits, emotional as well as financial; the more mutual respect, good will and tolerance divorcing spouses show each other, the more those benefits will yield.

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