Why Might You Need to Get a Business Divorce?

While not strictly a legal term of art, a business needing to be broken up due to its owners no longer being able, or willing, to do business with one another may lead to a “business divorce”. The process of a business divorce can be nearly as complex and stressful as a personal divorce depending on the issues involved. But why would someone ever need to get a business divorce?

  • Breaking up a family business
    • Unsurprisingly, one of the most common reasons for a business divorce is that the co-owners are spouses, and their own marriage is breaking up. In that scenario, dividing up the business becomes another part of dividing up marital assets. It also means that deciding how to break up the business can become a major point of contention in both the business divorce and the marital divorce. Similar situations may occur with parents running a family business with children, or when children who inherit a family business cannot agree as to the management of that business.
  • Co-owners disagree on how to run the company
    • Another reason for a business divorce is that, over time, business partners may come to disagree on how to run their business. For example, one business partner may be comfortable with keeping their business small, while another may want to expand substantially. If such a disagreement becomes an irreconcilable divide between co-owners, it may make this measure necessary.
  • A business partner breaches their fiduciary duty
    • Another possible reason for a business divorce can happen if a co-owner violates their fiduciary duty, damaging the business as a result. This can happen due to a co-owner using their position in a company to benefit themselves at the expense of the company, or by creating a conflict of interest due to investments or relationships with other companies. In such a case, a business divorce may be necessary to remove the disloyal business partner and keep them from doing additional harm.
  • The business is failing
    • A business divorce can also be a part of dealing with the consequences of a failing company. When a business fails to make enough money to stay afloat, it can be necessary to split it up as part of an attempt to reorganize it into something more potentially profitable. In the worst case scenario, a business divorce could instead become a part of winding down a company’s affairs, with the aim of ultimately closing it down.
  • Business partners no longer get along
    • Sometimes there is no specific reason why business partners stop being able to work with each other. Instead, their personal relationship simply sours over time, in a way that is not due to any wrongdoing on anyone’s part. In such a case, a business divorce may be necessary to help the co-owners to go on their separate ways and part on relatively amicable terms.

 

The Law Offices of Hunziker, Jones & Sweeney routinely handle business law matters for New Jersey business owners, whether for a small start-up, a mid-sized company, or a large corporation. Whether the matter concerns the drafting of a simple agreement, or instead involves a more complex transaction involving multiple parties or facets, the firm can assist. Contact the firm for a consultation at (973) 256-0456 or fill out our contact form for a consultation.

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