For years, you and your spouse ran the family business, but it wasn’t just your average mom and pop shop, it was also the children, the nephews and nieces, aunts and uncles, and grandparents, among anyone else who could give a hand. Throughout the marriage, the business grew. Now, as you and your spouse are separating, you’re left with the question: what do we do about the family business?
As a Portland divorce lawyer and mediator, I have represented and mediated for many clients in a similar situation, and at Schultz Family Law, we believe that mediation can be a useful solution when removing a lot of the risks that go along with a divorce when a business is involved. So, are you going through a divorce or separation and you need to resolve any conflicts with the family business? If so, call Schultz Family Law in Portland today.
Below, we’ve included some important information about mediation and the family business in Maine divorce cases.
Benefits of Using a Local Mediator in Portland
Mediation is a popular option that helps separating couples resolve conflicts without the costly and time-consuming interventions of Maine courts. Some of the benefits of mediation over dispute resolution in court include, but are not limited to:
- Mediation saves time. Court battles are notoriously lengthy and can take years to conclude. Mediation is fast largely because its focus is on settlement; however, the length of mediation can depend on a variety of factors, such as the nature of the dispute, the complexity of relevant financial issues, the relationship of the parties involved, and so on.
- Mediation reduces stress and preserves your emotional resources. The informal environment of mediation and the focus on conflict resolution is better suited for reducing stress when compared to a court battle. It’s realistic to expect that going to court for your business will affect your work performance.
- Mediation can be less costly. When business is involved in mediation, you may still have to acquire a professional business appraiser or neutral forensic accountant; even so, the costs of mediation can be significantly less than litigation. In some extreme cases, the costs of litigation may be more than the business is worth.
Depending on the circumstances of the business and the separating couple, mediation may last only a few hours or, for complex cases, it may last a number of days. Small business disputes with litigation pending can take a full day; larger business disputes that involve multiple elements (such as patents, complex contracts, and multiple parties) may last several days or more.
Issues That May Come Up in Mediation
Getting divorced when a family business is involved can make the legal process more complex. Remember, the division of property and business assets is rarely 50/50. Additionally, even if both parties started the company equally, they probably won’t want to continue working there, together, after the divorce. Some other issues that may come up in mediation include:
- Both spouses owned and operated the business during their marriage
- One spouse owned and operated the business during the marriage
- One spouse owned a business prior to marriage and continued to operate it during the marriage (and there has been a change in value since the date of marriage)
- If support for children and the spouse is required, then it’s necessary to determine the self-employed income of one spouse
To resolve these issues through mediation instead of court litigation, we at Schultz Family Law will lead negotiations through them in a peaceful and respectful manner. Furthermore, we will ensure that any business valuation or forensic accounting is complete in a time-efficient, cost-efficient, and neutral manner, giving both spouses the possibility to have a fair and reasonable dispute resolution.
Options for the Family Business in Divorce
In mediation, there are several options for the family business, based on the issues listed above and our aim for quality, professional, and thorough mediation. Some of these options include:
- Buy out. In this situation, one spouse (Paul) owns all interest in the business (100%). Through the divorce, however, he’ll need to pay his wife (Mary) the equivalent value of 50% of that business. Through mediation, Paul and Mary can agree where that money will come from, such as using cash or trading the 50% interest for another asset, for example.
- A benefit of this method is that it allows a clean break for both spouses and eliminates the potential for future conflict associated with co-managing the business in the future.
- Buying out can be problematic if there are no funds for the buy out; in some cases, a valuation can help ensure a fair deal.
- Continue Joint Ownership. Following the divorce, you and your spouse can continue operating the business together. However, since you are not married, it’s a good idea to consider a solid partnership or a shareholder agreement to protect yourself from the possibility of future conflict.
- A benefit of this option is that you’ll continue owning the family business together and, therefore, there might not be a need for valuation.
- This solution is generally not suitable for high-conflict divorce.
- Sale to a third party. This option means selling the business away to an independent third party.
- A benefit of this option is that it provides a clean break and gives both you and your spouse a little money to start over.
- Selling a business can take time, and so it’s important not to sell your business short in order to achieve a quick closure.
Call Schultz Family Law in Portland Today!
For the most part, many couples mediating their family business in the Portland area seek to resolve the conflict quickly and move on with their lives. Fortunately, with our family law firm’s legal experience and record of successful cases, we can provide comprehensive mediation services with the goal of resolving your disputes without the costs and time expenditures of litigation in court.