Divorce for Entrepreneurs: Protecting Your Business & Your Future
??Carmela DeNicola??
Mediator - Specializing in Business, Business Partnership and Workplace Mediation, Divorce, Complex Divorce with Family Owned Businesses
Getting divorced is not only emotionally stressful for entrepreneurs, but it can also take a major toll on their business. According to a recent survey, 57% of business owners said that their company took a financial hit during their divorce, and one out of 20 owners had to close their business due to the effects of the divorce.
The divorce process itself is usually where all of the starts. The inherent disputes that led to the divorce are often exacerbated by a long, drawn-out court battle. Add in the other complexities that come with being an entrepreneur, such as valuing the business and the potential clash between parenting responsibilities and the demands of running a company, and it is not hard to see why business owners often struggle because of their divorce.
The Complexity of Business Valuation in Divorce
One of the most significant challenges entrepreneurs face during a divorce is the valuation of their business. Unlike traditional assets such as real estate or investments, businesses can be difficult to value accurately, particularly if they have unpredictable income patterns or are in the early stages of growth. Courts often struggle to grasp the nuances of business valuation, which can lead to unfair divisions of assets.
Factors that complicate business valuation in divorce include:
Balancing Parenting Responsibilities and Business Demands
Entrepreneurs are known for their dedication to their businesses, often working long hours and navigating unpredictable schedules. When their divorce involves children, finding a balance between parenting responsibilities and the demands of running a business can be incredibly challenging. Courts often impose rigid parenting schedules that fail to account for the unique needs of entrepreneurs, leading to increased stress and potential conflicts.
Challenges entrepreneurs face in balancing parenting and business include:
Protecting Your Business and Your Professional Future
For many entrepreneurs, their business is not just an asset; it is an extension of their identity. During a divorce, the future of the business can be put at risk. Decisions about ownership, restructuring, or even the sale of the business may be made without the entrepreneur's full input let alone approval. This loss of control can be particularly devastating for those who have poured their heart and soul into building their company.
Mediation offers a solution to the unique challenges entrepreneurs face during divorce. Unlike traditional courtroom proceedings, mediation allows for a more cooperative and flexible approach to resolving disputes. With the help of a skilled mediator, entrepreneurs can work with their ex-spouse to develop customized solutions that address their specific needs and concerns.
Some of the potential benefits of mediation for entrepreneurs who are facing a divorce include:
Flexible Parenting Plans
One of the primary ways that mediation helps divorcing entrepreneurs is the ability to craft flexible parenting plans that accommodate the demands of running a business. In a traditional court setting, judges often impose rigid schedules that fail to account for the unpredictable nature of entrepreneurship. Through mediation, however, business owners can work with their ex-spouse to develop creative parenting arrangements that allow for greater flexibility.
This might include alternating schedules based on business needs, incorporating virtual visitation for times when travel is required, or establishing contingency plans for unexpected work emergencies. By tailoring the parenting plan to the specific needs of the entrepreneur, mediation can help reduce stress and minimize conflict between work and family obligations.
Fair Business Valuation
Another significant advantage of mediation for entrepreneurs is the opportunity to work with business valuation experts to ensure a fair division of assets. As we talked about earlier, courts may rely on a limited understanding of business valuation methods, leading to decisions that fail to capture the true worth of a company. In mediation, entrepreneurs can bring in their own valuation experts to provide detailed analyses of the business's financial health, growth potential, and industry-specific considerations.
This cooperative approach allows for a more accurate and equitable distribution of business assets, taking into account factors such as intellectual property, goodwill, and future profitability projections. By ensuring a fair valuation of the business, mediation can help entrepreneurs maintain financial stability and protect their hard-earned assets.
Control Over the Business's Future
Mediation also offers entrepreneurs a greater degree of control over the future of their business. In a courtroom divorce, decisions about the company's ownership, structure, and direction could be made without the entrepreneur's full input. This can be particularly devastating for those who have poured their heart and soul into building their business.
Through mediation, entrepreneurs can actively participate in crafting agreements that align with their vision for the company's future. This might include negotiating buyout terms, establishing provisions for decision-making authority, or creating safeguards against forced sales or liquidation. By maintaining control over the business's trajectory, entrepreneurs can ensure continuity and stability for their employees, clients, and stakeholders.
Privacy and Confidentiality
Privacy and confidentiality are paramount concerns for many entrepreneurs, particularly those in high-profile industries or with public-facing brands. In a traditional court divorce, proceedings are a matter of public record, potentially exposing sensitive business information and personal details to scrutiny. Mediation, on the other hand, offers a private and confidential setting for resolving disputes.
All discussions and negotiations that take place during mediation sessions are kept strictly confidential, protecting the entrepreneur's professional reputation and minimizing the risk of negative publicity. This level of privacy can be especially valuable for entrepreneurs who are concerned about the impact of divorce on their business relationships and client confidence.
Mutually Beneficial Problem-Solving
Finally, mediation fosters a cooperative approach to problem-solving that can be particularly beneficial for entrepreneurs facing complex financial issues. In a courtroom setting, the adversarial nature of litigation can lead to prolonged conflicts and a focus on "winning" rather than finding mutually beneficial solutions. Mediation, in contrast, encourages open communication and creative thinking, allowing entrepreneurs and their ex-spouses to work together in identifying innovative solutions to their unique challenges.
AMS: Supporting Entrepreneurs Through Divorce
At Advanced Mediation Solutions (AMS), we understand the unique challenges entrepreneurs face during a divorce. We have a full team of in-house experts, such as business valuation specialists and other professionals, whom we can bring in to help with various aspects of the mediation. This allows our clients to make the most informed decisions on how to divide marital property and other important matters that must be resolved in the divorce settlement.
If you're an entrepreneur who is facing divorce, we invite you to contact AMS to learn more about how you can benefit from mediation. Call us today at (856) 669-7172 or send us an online message to schedule a free consultation. We keep flexible hours for the convenience of our clients, and we also provide virtual mediation for those who have a hard time meeting in person due to scheduling or other concerns.