Divorce in Your Family Business

Feb 6, 2020

Divorce is one of those messy transitional moments that can rock your family business. This level of finality is complicated enough when two people aren’t in business together, but when you add the many factors associated with running a company, divorce can be a nightmare.

As common as divorce is in our modern day, we can’t forget that it represents a tremendous loss—second only to the physical passing of a spouse or loved one. The obvious differentiator is that the person is still alive, and if this person is a vital part of the business, things can get really messy.

Divorce in a family enterprise represents a different level of entanglement than it does in other types of businesses. The stakes are higher because the emotional attachment is intertwined in the day-to-day operation.

Beyond dealing with the many emotions that surface in the family, there is a separate entity that must be considered—the business itself.

Painful as it is, there are some ways to think about this transition that can mitigate the many decisions that must be made in your company. It’s helpful to have clear strategies moving forward. Easier said than done when emotions are running high.

Identify the Threads of Entanglement

You’re in the trenches each day, and it’s easy to forget the complexity of the operation.Within every family business there are threads of entanglement that must be identified. It’s wise to take the time to map out the many segments and systems that may be impacted by this divorce.

If you’re a very large company, the operation has been structured for protection as you’ve scaled the business and established your family office. I find, however, that small-to-midsize businesses often fail to put the proper measures in place. If you don’t have a solid support structure wrapped around your business, divorce will definitely catapult you in that direction.

Obviously, the complexity of the separation depends on the players and their role in the company. Size of the business also matters. There are taxes and profits and customers to consider. If the couple are founders or key players in the company, there’s also going to be a shift in the infrastructure of the business.

Questions must be asked and answered: How will we break the news to employees? How will this divorce impact their working environment? Their sense of loyalty? Will both parties stay in the business or will one buy the other out?

A husband and wife who started as founders will represent a different level of transition than will the divorce between two players in the second or third generation. What do we do about a former son-in-law, for example, who is a vital part of the operation?

The hardest question of all: Will we need to divide or dissolve the company?

Reviewing the complexity of the business in the context of divorce will help you know exactly where you need the intervention and support of key players like your attorney, accountant, and wealth manager. Separate the emotion from the most pressing needs of the business, and you are then better positioned to ask your family office for the specific help you need during this painful time of transition and change.

When you clearly identify the threads of entanglement, you might also be surprised to see that the help of a third party objective professional— a therapist, consultant, or coach—is necessary to help you sort through the many systems involved in such a transition.

These systems go beyond the tactical issues above. They include the emotional, psychological, and behavioral points-of-pain that you and others will encounter along the way.

Once you’ve clearly identified the threads of entanglement, the next step is to think of strategies that will help you sort through all that needs to happen in these three categorical areas as they will impact who you are as a person moving forward.

Topics for another post, but for now please be kind to yourself in the midst of this transition.

You must remember that a divorce-in-business, in whatever form it takes, is one of the most difficult transitional moments. Not only have the key players worked hard to build a family, they’ve worked hard to build a business and a family legacy. It can look and feel as though all is lost.

It doesn’t have to be that way.

In today’s world, you have access to multiple resources that can help you through the healing process without destroying the company.

The question is, will you be wise enough to use them?