Three stories of businesses amid divorce

Do you co-own a business with your soon-to-be-ex husband? These three stories, from recent cases of mine, will be instructive. That’s because I’m a CPA, a CERTIFIED FINANCIAL PLANNER^® professional, and a Certified Divorce Financial Analyst^® professional.

Story 1: The worker-bee dilemma

In this case, the divorcing woman did not own any portion of the husband’s business. Not that that makes any real difference in the eyes of the law: Arizona community-property law doesn’t care whose name the business is in.

Still, this woman was involved in her husband’s business; she helped run its operations. And so her attachment wasn’t just financial. It was emotional. She had personal relationships with many of the other people who worked there. Which made things awkward during the divorce. In other words, I understand that there’s more here than just (!) money and family.

Story 2: The complicated investment portfolio

In this story, it’s not really a business that the husband and wife owned. It was a real estate portfolio—comprised of things like rental properties—which they co-owned and the wife managed.

They didn’t have much in the way of retirement or brokerage accounts, so the woman sought liquidity (read: “spend-able cashflow”) in the form of rents from the rental properties. In other words, she wanted to keep some of the properties, post-divorce.

But it turns out that some of the tenants were friends of theirs. And who would end up being the landlord—or landlady—post-divorce?

I’ve found that men, generally, are better than women at compartmentalizing business issues vs. personal ones. That was the case here. This woman was torn. Yet she knew she’d still need grocery money, post-divorce. Simply “owning a real estate portfolio” won’t check that box.

The wife wants out

Here, the husband and wife co-owned a business. Given the divorce, the woman just wanted out. She was happy to divorce herself from the business, along with her husband.

But this one was complicated, too. Some of their wealth was tied up in commercial properties, which were leased back to the business.

Again, the wife was looking for liquidity: grocery money, or the down payment on a new house. Yet the husband lacked enough cash to buy her out. Meaning he’d need to come up with a payment plan—or take out a loan—in order to reach an equitable settlement.

Last note: Arizona Rule 69

If you go to mediation—and most divorces do—there’s a thing in Arizona known as Rule 69. It says that if the mediation extends beyond one day, you can’t go back and change anything, on Day Two, that you’d agreed to on Day One.

Why do I bring this up when talking about businesses amid divorce? It’s because mediators always want to “take things off the table” immediately—things you can’t change your mind about on Day Two.

And boy do they have a tendency to take the wrong things off the table! It can get real costly for you, real fast, especially when there’s a business involved. And you only have one chance to get this right.

Is there a business lurking amid your pending divorce? Contact me and let me help you, and your attorney, pursue a truly equitable settlement.