Keeping the Business in the Family – Divorce Protections

A critical aspect of keeping a business in the family concerns the possibility of divorce, which can happen with a business founder or the founder’s children (or grandchildren). More specifically, if a son or daughter has an ownership interest in the business and they divorce, without prior business protection there is the possibility that the soon-to-be-former family member will have the right to a portion of the business ownership in the divorce. As a result, in addition to a potentially acrimonious divorce, the family members who may also own a share of a business may suddenly find that they are now in business with someone who no longer is part of the family.

There are ways to proactively protect against such event including prenuptial agreements in which the non-family member spouse agrees not to seek a direct interest in the business. We help clients understand these options and the actions that can be taken to avoid this undesired outcome.