Author of Sole Trader: The Holistic Therapy Business Handbook, Jane Sheehan shares words of wisdom on how to divorce-proof your business
You fall in love and you think it will last forever… However, please take these words of advice: Think about the worst-case scenario and plan accordingly. One of the biggest reasons for businesses to fail is due to divorce.
To divorce-proof your business, make sure you don’t make your lover your business partner. It may be very tempting, but in business, it’s best if there is only one boss and even better, if that boss is you!
If you’re setting up a Limited company, then there may be reasons why you want your lover to be a director and have shares in your company. If this is the case, think very carefully. If you were to split up, just making them a 1% shareholder would mean that you have controlling interest in the business, and you would still be able to operate and wouldn’t be liable to pay over all your money to what may essentially be a silent partner. However, if you were to make them a 50% shareholder, how would you resolve any disagreements and what would happen if you could not reach an agreement at all? How would your business fair in this circumstance? Seriously, take some good legal advice and hire a great accountant. You can’t afford to get starr-eyed if you want your business to survive.
Set up a separate bank account for your business, with only you as the signatory. If the worst happens, your soon-to-be-ex-partner won’t be able to empty all your coffers of cash. Your business will still be able to flourish when your relationship is floundering.
Consider drawing up a pre-nuptial agreement which stipulates what would happen to the business if the worst was to happen. Whilst this may not be legally watertight it does show your intent at the outset, and if you both sign it, this will carry some weight when considered at time of divorce.
I know of one business where the couple had divided up their skills and agreed which tasks should be tackled by whom. However, once divorced, they went their separate ways, the person left holding the business realised that they did not know how to do some of the essential tasks in their business. They’d relied so much on their partner doing these chores that they did not have the skills or knowledge to take over this part of the business. Make sure that even if you delegate, you at least know what is being done and how it is being done so that you could take over if necessary.
Interesting statistics relating to divorce:
- More than one third of Fortune’s “50 most powerful women in Business” have a stay at home man
- In 1993 there were 300,000 marriages and 165,000 divorces in England and Wales. In 2010 that reduced to 241,000 marriages and 119,589 divorces.
- Divorce rates in the UK have gone down by 27 per cent when compared with 1993 and applications for divorce by women in the first three years of marriage have gone down by 51 per cent.
- The number of divorces in England and Wales in 2010 was an increase of 4.9 per cent since 2009, when there were 113,949 divorces
- The divorce rate rose in 2010 to 11.1 divorcing people per thousand married population from 10.5 in 2009
- 22 per cent of marriages in 1970 had ended in divorce by the 15th wedding anniversary, whereas 33 per cent of marriages in 1995 had ended after the same period
- The number of divorces in 2010 was highest amongst men and women aged 40 to 44
Source: Office for National Statistics
Image credits: Appeared in print version of HTM