The Impact of a Business Partner’s Divorce

Maintaining good relationships with business partners and other key personnel in a company is essential to smooth and effective operation and avoiding potential business law issues. For business partners and executives, a marital divorce among this group can detrimentally affect business operations. Advanced planning by the business and its owners is vital. Effective planning for such contingencies is a part of good business practices designed to keep an organization running in the long term. A discussion of some options for factoring these events into a business plan and how to respond if relations among business partners or executives break down over these issues follows:

Advanced Planning

Businesses can protect their viability and help insulate themselves from the effects of a business partner’s divorce by creating a buy-sell agreement.  A buy-sell agreement is a contract executed by and between the business partners and business which sets forth how each business partner’s ownership interest in the business will be transferred if a business partner exits the business or needs to sell his or her interests.  It provides for business partners and/or the business to purchase the shares of a divorcing partner and provides some degree of protection against such interests being transferred to the divorcing partner’s ex-spouse. Additionally, a business may want to consider making each business partner’s spouse a party to a buy-sell agreement and include provisions mandating that spouses sell to the business any ownership shares obtained as a result of a divorce decree.

Business partners can also protect themselves by entering into appropriately drafted prenuptial agreements which establish what each spouse’s property rights will be in the event the marriage ends in divorce.  Such an arrangement may provide additional protection against the business partner losing his or her ownership interests in a divorce.

Contact Our Firm for Legal Advice

If you have questions about setting up a buy-sell agreement, a partnership or operating agreement, speak with an experienced business law attorney. The Atlanta attorneys at the offices of MendenFreiman have extensive experience representing business clients in a variety of matters, including drafting and reviewing contracts used to set up key business relationships and drafting premarital agreements. Contact us today to learn how they can help you.




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