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Dealing With a Family Businesses in a Divorce

Husband and wife entrepreneurial teams are not uncommon in Kentucky and around the country, but deciding how to divide business assets can become a contentious subject when these couples divorce. Some married business owners choose to tackle the issue directly by putting detailed buyout clauses into place, which is a step that the founders of a thriving New York-based software company may wish they had taken.

The couple involved formed their company while studying at New York University in the 1990s, and the business has gone on to become a leader in automated translation that boasts more than 3,000 employees. However, the couple, who never formally married, soon began to disagree, and they had no written buyout policies in place to prevent a protracted and costly legal battle from developing.

That dispute eventually found its way to the Delaware Supreme Court, which ruled on Feb. 13 to uphold a previous decision ordering the sale of the business. The sale was ordered because the court felt that the owners’ irreconcilable differences were jeopardizing the future of the company and endangering its workers’ livelihoods. Some of the firm’s workers have voiced concerns over what a forced sale could bring, and one of the founders has vowed to appeal the decision to the U.S. Supreme Court.

Experienced family law attorneys may suggest that couples take care to keep their business financial records separate from their personal expenses. Property division negotiations can grind to a halt when one of the spouses involved feel that they are being taken advantage of, but these issues may often be avoided by prudent planning. Attorneys could also urge entrepreneurial couples to protect their commercial ventures by approaching these issues proactively. Properly drafted buy-sell agreements may list the situations that could trigger a buyout, specify how the value of the company will be determined and who it can be sold to.