Deborah L. Cohen writes for Reuters about Divorce and the impact on small businesses. Ms. Cohen points out that when small business owners go through a divorce, their attention is distracted from their business, causing financial impact on the business which may already be distressed due to the downturn in the economy. Cohen points business owners to four ways to protect themselves: 1) a will, 2) a premarital agreement, 3) buy/sell agreement, and 4) an entity to hold the business in trust.
Although Ms. Cohen’s points are valid — divorce does have a significant impact upon small businesses, I disagree with her points for protection. To me, the biggest impact of a divorce on a small business is the distraction the divorce and personal problems in general cause on the business owner. When a business owner’s focus is diverted, the business can dwindle. To counteract this problem, the business owner should work very hard to find an attorney to handle his divorce who has experience with small businesses and who he feels comfortable with. That way, the business owner can focus on running his business and allow the divorce lawyer to focus on the divorce as much as possible.
Although it is a good idea for anyone to have a will, a will has no effect in a divorce. A buy/sell agreement is also of questionable effect in a divorce in Texas since such agreements usually only bind the business owners and not the spouses. Such agreements, to be enforceable, would need to comply with the rules regarding post-marital agreements. LIkewise, placing a business into a trust could be frowned upon in divorce court and considered fraudulent to the marital estate by depriving the marital estate of a very valuable asset.