Friday, January 15, 2010

What Happens to the Family Business?

Sometimes, families facing a divorce have a successful family business which must be included in some fashion when a plan is agreed upon to divide the parties' assets. Because Collaborative Law encourages the parties to be creative when they decide how to divide their assets, there will usually be numerous possibilities to consider. In traditional litigation, the options are usually somewhat limited. Probably the two most common approaches: a value is put on the business and one party buys out the other, or they just sell the business. To have a buy-out, usually each party will hire his or her own expert to value the business and then they negotiate or have a hearing to determine the value.

A Collaborative case is different.

Setting Goals
The Collaborative approach can be radically different. One of the first steps in the process is to determine the goals for each party. The goals may include retaining an ownership interest in the business or might be a desire to exit the business. Instead of planning to arbitrarily split the value of the business, the parties are free to begin by stating their preference. The preference could be to share ownership and operation of the business, it could be to sell to someone else, or it could be some other choice they come up with. The key is to start by asking what the goals, needs and interests of the parties are, and then fashioning a plan around those objectives.

Neutral Expert
Another difference between Collaborative Law and litigation is that Collaborative normally uses a single, neutral expert, chosen by both parties, to place a value on the business if that value is important to their approach. That saves money for the parties and reduces the arguments between the sides.

Gathering Information
As the parties gather information during their Collaborative divorce, the attorneys will evaluate the facts to determine if there are any legal issues, such as possible separate property or possibly a reimbursement claim, that need addressing. In a Collaborative settlement, those issues aren't automatically major issues. Their importance depends on what the goals are for each side.

Creating Options
After the parties gather information, they will generate options. Dealing with a family business, the parties may consider a wide range of choices. They could include some of the following:
  • Continuing in business together, even after the divorce is final. Each might control certain aspects of the business.
  • One side buying out the other, either immediately or over time.
  • One party taking the business and the other party taking another valuable asset.
  • The parties could jointly sell the business.
  • They could dissolve and liquidate the business. Sometimes the components may be worth more than the intact business.
  • They could agree to change the format or the products of the business, or go from retail to wholesale, or vice versa.
  • They could divide the business or assets where there are multiple locations, such as a restaurant chain or several pieces of real estate.
And there could be other choices as well!

With expert financial and legal guidance, both parties can reach agreement on the best financial terms for themselves, consistent with their underlying goals. Collaborative Law provides the best chance of coming up with a win-win solution for both parties. Usually, couples don't continue to operate a business together after a divorce, but that is one of many options available with the Collaborative process. How ever they slice it, couples benefit by keeping control over the outcome of their family business.

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