What is a business divorce?

Divorce is a difficult subject to talk about many people believe is only spoken about when couples seek to break away from a marriage. It can be surprising to some that marriage and business relationships are very similar. A business divorce is the separation of business partners. 

A business partnership is an arrangement between two or more parties. These parties have shared responsibility to oversee the operation of a single business with the expectation that the rewards and profits are shared. A business partnership has several advantages. A business may profit from a partner’s experiences, connections and knowledge. Furthermore, partners can divide work to make it easier to manage operations. However, doing so requires strong communication, trust and enthusiasm. Lacking any of these could lead to a failed business partnership.

If a partnership does not work, partners may seek to settle the relationship through a business divorce. Much like a divorce between two spouses, a business divorce often requires negotiation to separate their interests. Here’s what happens during a business divorce: 

What is discussed during a business divorce?

There are several aspects of a business that often need to be examined during a business divorce. A business divorce often begins by presenting the issues that led to the falling out. Business business partners often need to examine the value of a business, such as its market value or asset-based value. Then, business partners have to determine how the business is divided, including debts, liabilities, assets, customers and employees. Once every aspect of a business is negotiated, parties can settle the divorce. 

How can you protect yourself from a business divorce? 

A strong business partnership agreement can help avoid a business divorce, however, many issues can not be predicted. Business owners may benefit from seeking legal help to understand their options.