Divorce is never easy, and it gets more complicated when a couple begins a successful business after their marriage. Massachusetts is an equitable distribution state which means the business equity is held marital in nature even if only one person does the work. There are very few people who divorce and then are able to manage working together on a daily basis, so splitting the company or leaving it is generally best for one spouse. Using mediation rather than going to court is an effective way of ensuring both parties continue to profit from the successful business, and it is the best way to ensure future alimony payments through divorce and family law court.
Splitting the Business Down the Middle
There are some businesses where splitting a company is relatively easy, and each person has their own territory. Mediation helps to decide which partner gets a particular territory, and this is usually done when both people enter an agreement willingly. Each partner retains their own share of business, and they negotiate physical territories so they do not steal each other’s customers. This is acceptable under Massachusetts law, and most judges deem it as a reasonable distribution of a family business.
Only One Partner Keeps the Business
Many businesses today require licenses, and splitting the business in half will not work if only one person has the licensing necessary to own the business. This does not mean their partner has no ownership, but they cannot own a business under a license they do not possess. If a judge forces the partner still working in the business to pay, they may shut the business down. Once the business is gone, the non-business partner cannot collect on assets or future income.
An Enforceable Agreement
It is imperative for the partner who cannot own the business to ensure they collect their fair share of past and future profits, so it is best to work out an agreement in mediation. While a judge will not force a person to re-open a business, they will generally order them to honor an agreement they chose to make.
If you are a small business owner and have questions regarding options for splitting your business through divorce mediation, please call our office to schedule a consultation.