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The economy and divorce: splitting a business

Who would have thought that an increase in divorce rates could be tied to an economic recovery? For many, the decision to get a divorce requires consideration of much more than just the desire to legally separate from a spouse. Not only are there personal implications but financial ones as well.

Most couples can understand the additional challenges that arise when a divorce involves children. Trying to establish custody arrangements and still maintain stability for the children is often a priority. But for some couples, divorce can become complicated if the two own a business together.

Couples who are business partners rely on profits from their shared company. And when a divorce seems imminent, a business that might fail if the husband and wife separate could keep them together. For some, this could mean pretending to still be happily married. For other couples, this simply means putting off the divorce process until the business is doing better.

The income from a business helps with many financial needs that a family has. These needs change drastically when a divorce is finalized. One spouse may discover that he or she now has rent to pay. There are costs associated with joint custody of children and costs for refurnishing a new home. Alimony may also need to be factored into the cost of living, particularly if one spouse was the primary “bread winner”.

Business partners who are also married to one another may also shy away from a divorce because the division of the business seems complex. How much is the business worth? What is it valued at? Was the business incorporated before the marriage? These are just some of the questions that can come in the divorce proceedings.

Source: Bloomberg Businessweek, “Worsening U.S. Divorce Rate Points to Improving Economy,” Steve Matthews, Feb. 18, 2014.

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