Can Mediation Work When You’re Divorcing a Business Partner?

It’s not unusual for partners in a marriage to also be partners in a business. But if the marriage fails, do the business partners also have to divorce? And if they do, is mediation still a viable option for dissolving the marriage and the business partnership?

First, let’s break down the issues. Just because two people don’t want to be married to each other doesn’t mean they can’t continue to work together successfully. So, it would be wrong to automatically assume the business relationship must end.

That said, let’s suppose the spouses do want to end the business partnership. What’s the next step? The couple should consult a business lawyer who has experience in partnership disputes and business dissolutions. Depending on the facts of the business, there are many different ways to resolve the issue:

• Sell the business to a third party — If your goal all along was to build a business that you could sell to the highest bidder, now may be the time. But selling simply because you’re getting divorced may not bring you the best price. There are many factors to consider, and you shouldn’t allow yourself to be pressured into selling prematurely.
• Dissolve the business, liquidate the assets and distribute the proceeds — If the market value of your business assets are roughly equivalent to the value of the business, this could be the quickest and easiest solution. But in most cases, a thriving company is going to be worth much more than the total of its parts.
• Have one partner buy out the other — This is often the best option for a viable business, but to make it work, the partners must settle numerous issues. Who stays and who goes? How much equity does the departing partner get? How should the business’s intellectual property be shared? How should the payment to the departing partner be structured? Where will the capital for the buyout come from? What are the tax consequences for each of the parties?

Some couples may want to keep the business discussion separate from the divorce, but treating the business as a marital asset has its advantages. If the spouse who is keeping the business does not have ready capital for a buyout, his or her portion of marital assets can be used to offset the transfer of business ownership.

As for whether the business aspects should be mediated, of course! Business partners enter mediation all the time to resolve disputes of this kind. Mediation saves time, expense, and the stress of an adversarial process. But if you choose to make the business ownership part of your divorce mediation, make sure you have an experienced mediator who has conducted complex divorces for high-net-worth estates. Too many divorce mediators are not even attorneys, let alone litigators with a track record.

To resolve your business ownership issues as part of your divorce, call Solutions Divorce Mediation, Inc.  at 1.631.683.8172 or contact our Long Island office online.