Women Business Owners Take Heed….

Did you know that incident to divorce, your divorce judge can order you to sell your business… and force you to comply?

You’ve worked hard to build your business, sacrificing untold hours and enduring stress, and you’ve made it… your company is a success! You’re a standout and a role model for other women business owners in a nation where fewer than three percent of women-owned businesses gross a million dollars or more.

And yet divorce proceedings can all too easily put the existence of your business at risk… whether your husband was involved in the company or not, regardless of who initiated the divorce.

It seems incredibly unfair, but if your business grew in value while you were married, the amount of increased value must be included in the pot of marital assets to be  divided between you and your husband. It doesn’t matter who operated the business or how it’s titled. Regardless of the judge’s sympathies for your position, your judge is legally obligated to ensure the percentage of marital assets owed to your husband is paid. If your portion of the marital asset pool cannot meet that obligation, choices become limited.  Can you raise the money by tapping into your relative’s assets?  Can you go to the bank and ask for a loan?  Considering court ordered time constraints, selling the business becomes a far more common scenario.  The money resulting from the sale of your business—usually at fire sale prices, again due to court-ordered deadlines, will help make up the difference.  Because a privately owned business is often the most valuable asset of its owners, this is all too common.

Your husband’s role in your business can also force its sale, even if your marriage has assets sufficient to meet his court-ordered portion. If he’s a business partner or is entitled to an ownership interest as ordered by the divorce judge, you may want a unilateral (undertaken or done by only one side or party), not mutual right  to buy out his share.  This unilateral right becomes  particularly important if you’d rather not have your ex-husband and his future wife as business partners. To do so, you might use your share of other marital assets or propose a long-term payout at interest. However, if your business represents the vast majority of your marital assets there may be no other way to buy him out than to sell the company, dividing the proceeds.

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