Some spouses still want to be business partners even after they divorce. There can be many reasons for this – both understand the nature of the business and wish to continue to participate, the asset is otherwise hard to value, and/or the spouses believe continuing the venture together will be more lucrative than a fire-sale as a result of the divorce.
Regardless of the reasons, special considerations need to be made for spouses continuing with joint ventures after the divorce is final. Both parties need to have clear expectations of their roles moving forward, and it is always advisable to have these expectations set forth in the corporate/LLC documents and business structure of the venture. If this is not possible, we advise clients to have separate agreements drafted to cover issues such as sale of shares, dilution of interest, salary caps, fiduciary duties, and plans for death or incapacity.
Having clients continue to own an asset with their ex-spouse goes against typical advice to sever as many ties as possible so that both parties can move on independently. Frequently the less contact and dependence on the ex-spouse, the better. With that being said, an on-going venture with co-owner ex-spouses can be a good solution in some cases.
As former spouses transition into this new role of just being business partners, it is important for everyone to have clear expectations with a full understanding of what you’re getting into, and that requires a specific written plan in the form of corporate or LLC documents. This can be the difference between a successful on-going venture and continued litigation. Whether the on-going venture is continuing to own a home together or continuing to own a commercial business, both parties need to go in with open-eyes and some level of on-going trust.
If you are thinking of a divorce and have questions about continuing to jointly own assets, you need an experienced attorney who can navigate these considerations with you.
If you would like to work with one of our experienced Attorneys, please call OWENS & PERKINS at (480) 994-8824 to schedule your free 30 minute consultation.
