Kline Legal Group P.L.C.

What happens to a business during a divorce

Some Michigan couples decide to try and start a business together. If the relationship becomes unstable, however, running the business properly may become problematic. While some founders plan for that contingency just in case this should happen, others fail to take this step. The failure to plan could cause the loss of the business.

One company that faced such a problem was based in Delaware. Although the couple was never married, they still failed to draw up an agreement that stated what would happen to the 3,500-employee company should the romance end. The two ultimately ended up being unable to make basic decisions together, causing the company to become dysfunctional. The case was taken up by the state legislature as, under Delaware law, the company could be sold if the owners became deadlocked.

A Louisiana woman also lost her business to her ex-husband during her divorce. The company split up as part of the divorce agreement. In fact, she had to actually buy the company back from her ex-husband. The two examples show just how important it is for couples or even friends to have a backup plan or a buyout plan in the event that they can no longer work together.

If a couple built and grew a company together during the course of their marriage, it can be difficult to determine who will get to keep the company should they divorce later on. This type of complex asset division is often a stumbling block in a high asset divorce. Absent an existing buyout plan, the couple might want to have the assistance of their respective lawyers in attempting to negotiate an accord.

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