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Leadership

What is the impact of divorce on your business?

Editorial team | April 2, 2021

When a couple goes through divorce proceedings, there are a lot of different ways that the divorce impacts them. It can be emotionally very difficult, for the divorcing couple and any dependents involved.

However, one of the areas of your life that you may not consider is your business and the impact that divorce could have on that, both financially and in terms of how it will affect your focus on running your business.

The financial impact of divorce on your business

As with your other financial assets, if you are a own a business, your business finances could come into the divorce settlement. Anything that is owned by a spouse is subject to distribution when a couple divorces, which includes shares in private companies. The distribution of business assets can be more complicated than other assets, especially if there are other parties involved in the business, such as another business partner.

However, if you are considering going ahead with a divorce and you have your own business, you have to consider how your business will be financially impacted. Unless there is a pre-nuptial agreement in place, a judge could decide that your business assets must be shared with your spouse.

One of the factors that the court bases decisions on is any compensation for relationship-generated economic disadvantage, so if your spouse supported business growth, for example, taking on more responsibility for childcare, this could be considered as an economic disadvantage to them.

Also, courts will be seeking to share any wealth built up during the course of the marriage, which of course could include your business, particularly if it has been growing during the marriage. The judge can order the transfer of shares from one party to another as part of the divorce settlement.

Another key business impact can be emotional stress

Other ways that your business could be impacted could be that the stress of the divorce could take a toll on your ability to run your business.

Even if you are the person petitioning for divorce, the consequences of divorce, such as sharing of assets, living arrangements and moving out of the family home can be very emotionally draining. Going through those kinds of experiences is likely to have an impact on your concentration and productivity levels at work.

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