# Divorce and a business



## pcplumber (Oct 12, 2008)

MattK said:


> Did your wife help develop the business from the ground up? Was she there in the beginning when it was just an idea? Did she support your household while you got it off the ground or was this fully established when you brought her in to take over some of the work load.
> 
> If she supported your life for a couple years while you made little to no money with this business, she may be entitled to a large portion of future earnings. As your business grows, she could return to the courts for a larger stake down the road. Depending on your answers, a buyout(if reasonable) may be the best option to shake hands and walk away vs always having her looking for additional money.
> 
> Just my two cents.


I divorced two wives and I am now on my third. I have always been 100% happy about my decisions to get divorced and 100% happy that I always gave my ex-wives many times more money and assets than the courts awarded and I live very peacefully knowing that I am taking care of the women I once loved because I find it very difficult to understand how people can say they truly love someone during the beginning and then say they hate or have no feeling at all regardless of what happened in between.

I won't bore you by writing about the things I gave my first wife. When I divorced my 2nd wife I owned several homes that were paid off and I had a stash of cash for an amount I won't mention. Since my 2nd wife was a serious drug addict and compulsive gambler her own attorney knew that she would blow assets and every penny on drugs and gambling. So, her attorney recommended to the judge that she should get only $240,000 and that is what she got plus an alimony of $600 per week (can't remember how many years). The best part of the settlement was the judge gave her $240k to me and he told me to invest the money for her. So, I invested her money into 3 apartment buildings and her portion of the appreciated to a huge amount I won't mention plus she receives about $4,000 per month from rental income for the rest of her life and this amount increases every two years when we increase our tenant's rents. Today, I am very satisfied that my ex-wife is set for the rest of her life and I am satisfied and happy that the money she receives does not come out of my pocket. I think I created a win win situation for everyone.

For your case, I don't see any reason why you would want to pay your wife what she (as an accountant) would or could make and I don't think the courts would care either. All the courts should be concerned with is what her equity is if she wants to cash out. For my 2nd wife, I did not want to see her living on the streets and the only thing I wanted to do was to make sure she would be supported for the rest of her life because she never worked one day and was incapable of earning and handling money.

Be fair and give your wife what she deserves. Don't pay her an accountant's pay. Don't be greedy and don't try to crush the same long-term dreams that you both worked for even if you think you did all the work in the business because even though women don't always take on much physical duties they usually have to go through the same mentally challenging stresses to support their husband's dreams. Try to work out a deal where your wife still gets a profit for a fair percent of the portion of the business that she owns. That could be an alimony for a number of years plus $100 per week as long as you own the business, or $5,000 per week if that is the percent that she is entitled to.

Try to create a win win settlement vs. worrying and arguing about what you get and have today. Put your reasons for getting divorced on the shelf and try to treat each other like you did during the beginning and maybe in future years you will be happy with yourself. If you can't be fair with this wife then how can any other women love, trust and respect you in the future. History repeats itself and a high percent of people never understand, never learn and never change. They only take their bad ways into another relationship.

Ask your attorney and her attorney to be fair and come up with a settlement that everyone think is the best for everyone without going to court. When I got divorced I insisted that all parties meet at one of the attorney's offices.


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## GregB (Jan 8, 2016)

MattK's info is a good example of laws that will vary widely by state. 

Let's assume the amount that each spouse contributes to the business affects the amount they would get back in RI. I don't know if that matters in WA but it sure doesn't in CA. Basically if any asset increases in value during marriage, that is community property. If one spouse works 100 hours a week building a business and the other works 100 hours a week trying to destroy the business, it is still 50/50. The one running doesn't get to decide to let the other one have it. He doesn't even get to decide to find another job or even start working 50 hours a week instead of 100. Basically each spouse is required to continue the standard norm established during marriage with certain other norms fixed at Date of Separation. Add certain Assets valued at Date of Trial and you can see what a mess it becomes. Pay a Forensic Accountant to value it, then go to trial. Now it needs to be re valued. If the trial drags on, it needs to be revalued again. And again and again. Hopefully the value doesn't change enough that it anyone wants to keep changing the value but it certainly can.

So many traps to fall into that there is very little absolute facts you can rely upon. One big one in CA is that all negotiations up to end of trial are for settlement purposes only and are not binding. So if you own a house and one spouse signs their share over to the other it doesn't mean that one issue is settled. Stupid, but that is how it is. Why argue about something and settle it once, when it can come back and lawyers can get paid to argue about it again? 

It gets so complicated that you need a lawyer to advise you. But then each lawyer is required to work to negotiate in their clients best interest and it spirals down into disaster quickly. Add the fact that arguing every detail helps to prevent malpractice suits and you can start to understand why some lawyers will gladly spend $5,000 of your money arguing about how to split a $5,000 item. Basically if the judge makes an order, the lawyer is less liable about quality of representation. If they agree to settle, they have made a choice which can be questioned later.


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## MABear (May 9, 2016)

One of my good friends went through this about a year ago. We live in Louisiana and it is also a no fault state. It definitely depends on what she wants. It's always good to plan ahead, but there's no point in freaking out until you know if she's going to fight or not. Granted, with my friend, it was all good until the very end when some of his wife's friends started talking her into all the money she should be getting. She got a lawyer and ended up costing them both more time and money.

I know it sounds simple, but just try to work it out with her instead of forcing the issue. Then if she doesn't play ball, do what you have to do.


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## rtztgue (Jul 9, 2010)

I see a lot of what if's here, and maybe I didn't make myself clear. I apologize if I missed that point. It won't matter what she did or did not do. She owns 50%.... There is no need to debate what she is entitled to as regards to ownership or community property. With regards to both, (articles of incorp and community property estate) she gets 50%. We started the business after being married and in Washington it wouldn't matter if I was 100% on the articles... She would get 50%...

As far as income, that's a different deal. It will be interesting to see how that lands, but in our State it varies on how they deal with it. and in my situation we both sacrificed for the other. I do know a judge would base her income on 40 hours. He will tell her to get a job for 40 hours and if she chooses not to then its her loss. I will not be forced to make up the shortfall. 

Now, after talking to a damn good attorney he was blunt and said the business would be mine. She can't run it, that's obvious, and a judge would either order it sold or give it to me. ( I would have to buy her out, but a judge would know that she couldn't run it so there is no sense in awarding it to her.)

I do plan to be fair, (i bought her a house, took the kids when she didn't want them, bought her new furniture, etc) but I won't be screwed either. At the moment, I am gathering intel, possible ideas, and trying to find out what she wants. That's like pulling teeth. Maybe she doesn't know.

I'll be chatting with my tax accountant who can guide me through our States requirements and offer ideas for income distribution. 

So far I think I will stick with the basic plan of asking for the larger income, making sure she gets paid for the work she does and if/when we sell give her 50%.


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## pcplumber (Oct 12, 2008)

rtztgue said:


> I see a lot of what if's here, and maybe I didn't make myself clear. I apologize if I missed that point. It won't matter what she did or did not do. She owns 50%.... There is no need to debate what she is entitled to as regards to ownership or community property. With regards to both, (articles of incorp and community property estate) she gets 50%. We started the business after being married and in Washington it wouldn't matter if I was 100% on the articles... She would get 50%...
> 
> As far as income, that's a different deal. It will be interesting to see how that lands, but in our State it varies on how they deal with it. and in my situation we both sacrificed for the other. I do know a judge would base her income on 40 hours. He will tell her to get a job for 40 hours and if she chooses not to then its her loss. I will not be forced to make up the shortfall.
> 
> ...


I read your first post four times and the way I see your question is you want to keep full control of your business. You don't want to break the business into pieces to give your wife an immediate 50% of the equity and you want to employ your wife, make small payments vs. a large payment and at the same time you are saying that you are considering keeping your ex-wife on as an employee you are complaining about her working only 25 hours per week and causing your books to get behind.

I think you are wrong that being incorporated will protect your business from being chopped into pieces. The word 'incorporated' usually means very little to judges for small corporations when it comes to personal assets and liabilities. 

Sorry, but I can't see a judge making any type of divorce settlement where the ex-wife will be required to work for her ex-husband in order for her to receive any portion of the 50% she is entitled to and to maintain the lifestyle she had when she was married. An employment agreement with your ex-wife would usually be something you do after you are divorced and not a part of the settlement. Divorce settlements and employment are two separate issues and your-50-50 split has to be at the time you get divorced. Otherwise, if you employ your wife as part of the settlement and split the business later your wife will probably want to get an attorney to make sure she is not being bamboozled and you will have to get re-divorced.

"Your honor, I would like to divorce my wife because we cannot resolve issues with our marriage, but I insist that you force my wife to work for me for less than I paid her during our marriage and if I ever sell the business I promise that she will receive her fair portion without her attorney and without this court's intervention."

Sorry, again! I think I took the wrong pills this morning.


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## Pearce Services (Nov 21, 2005)

I am sure you already have lots to think about here, In my opinion...

There is no good to come from still working together

There is no good to come from letting her own a portion of the business so that as you grow it's value, she will be able to take more from you later.

If she wants a clean break, she should want out, and to get on with her life in a new career. Offer to pay her a certain amount per week to not work there for 1 full year while she begins a new life, then she is out completely. If need be, she can also file for unemployment if after 1 year she is not working.

The business assets are necessary for you to run the company, If she has the best interest of her children at heart, she will want you to be profitable so you can support the kids and send them to college.

I have no plans to divorce, but my wife plays a very similar role in my company. If this ever happened to us, and she stayed in the business, (which I know she would not), the business would suffer and the conflicts would be more significant.


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## rtztgue (Jul 9, 2010)

Pcplumber.

It is not my intent to force my wife to work for me. I could care less about that except for when it comes to income distribution. What I am shooting for is an equitable income if she does stay on. It is one thing when we are married to have her taking it easy and sharing in the income. But now that we are divorcing I don't plan on working my butt off so she can sit at home watching Netflix all day and taking half my income. 

My plans are coming into focus and I was thinking of a something like this. (I fully realized that we both have to agree to this) We set up distributions (For example $1000 a month per owner: her and I) Then she gets paid $25 hour for her paperwork portion. (basically the same wages as if we had to hire it out, which may happen if she moves on.) Finally, as CEO I get a monthly salary commensurate with running the business. At the end of the year we maybe do profit sharing. Splitting it 50-50. 

Anyway, I see that as fair. It gives me the incentive to run the business, keeps her share at 50% and allows for a basic income even if she quits and goes somewhere else. I would have to get her to agree with the deal, but in studying other companies this structure is not unusual. Owners share in the profit, but if one owner takes a position in the company then they get a salary commensurate with the position. (profit sharing and salary) My wife would get the same, it would just be that her position in the company is worth a lot less. She would share in profit, but make less income due to her hours and job.


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## pcplumber (Oct 12, 2008)

rtztgue said:


> Pcplumber.
> 
> It is not my intent to force my wife to work for me. I could care less about that except for when it comes to income distribution. What I am shooting for is an equitable income if she does stay on. It is one thing when we are married to have her taking it easy and sharing in the income. But now that we are divorcing I don't plan on working my butt off so she can sit at home watching Netflix all day and taking half my income.
> 
> ...


My mother always tells me that I should cut my relationships clean. For most people in this world I believe my mother is 100% correct. I think I understand where your head is at and maybe not. If what I think is correct I would sit with your wife first and ask her what type of money she would like that would make her happy and then work from there, but I would never offer some sort of percent where you have to answer questions in the future. I would prefer to offer a lump sum of money and make equal weekly payments vs. large monthly payments. Then, after X number of years your ex is paid off and you cut your relationship clean. When I negotiate with customers and ex-wives I always ask them to have their relatives, friends or attorney present for their personal benefit so the ex does not think you are trying to bamboozle her. It is better to have an audience when you make your proposal vs. having your ex try to explain your offer while relatives are screaming that they want to have you murdered. Lots of luck!!!


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## Aramis (May 14, 2016)

It's cheaper if you stay with her! Lol


This is why you shouldn't get married!!!


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## pcplumber (Oct 12, 2008)

Aramis said:


> It's cheaper if you stay with her! Lol
> 
> 
> This is why you shouldn't get married!!!


My shrink, during my 20th year of sessions, told me that most unhappy married couples stay together because the pain of breaking up is worse than the pain of staying together.


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## SectorSecurity (Nov 26, 2013)

This thread reminds me of why I am glad I have no partners investors or anyone else who has a say in my business.

Also makes me glad I'm not married.

I feel your pain been going through the family courts for 4 years myself.


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## Anti-wingnut (Mar 12, 2009)

rtztgue said:


> I think its fair that my income is a lot higher than hers. I just don't know how to set that up. Can I just set it as CEO or will she have to agree to it by being 50-50 owner?


I think you know the answer. You are CEO either by agreement or by fiat. All the shareholders are eligible to nominate and vote for officers of the crop. In your case, in a contested election there will be a 1 to 1 tie. So she has exactly the same power to vote herself in as CEO and give herself a big raise as you do to set her wage and beclaim yourself CEO. 

You can also get into a situation where if your wife does not agree to the terms of a buy out agreement, she could force a partition of the corp and everything could be sold and divided up 50-50.

Could suck to be you.


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## rtztgue (Jul 9, 2010)

Anti-wingnut said:


> I think you know the answer. You are CEO either by agreement or by fiat. All the shareholders are eligible to nominate and vote for officers of the crop. In your case, in a contested election there will be a 1 to 1 tie. So she has exactly the same power to vote herself in as CEO and give herself a big raise as you do to set her wage and beclaim yourself CEO.
> 
> You can also get into a situation where if your wife does not agree to the terms of a buy out agreement, she could force a partition of the corp and everything could be sold and divided up 50-50.
> 
> Could suck to be you.



Not really. I can rebuild easy enough. I would hate to lose a business that is making money and doing very well, but if she forces it she is only hurting herself. As for me, I would sell off, take my share and start again and do just as well. All of that is theoretical. She could become mean and nasty but its not in her nature. Not saying she can't learn it, but so far it has been amicable. 

I did speak with one of my accountants and she thought my idea was solid. Pay the ex an hourly wage, pay me a salary, and at the end of the year do profit sharing. 

Now I just need to see if the ex will agree. If not, close up business, or sell her my half, buy her half, or whatever... But at least I have an offer to start with.


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## pcplumber (Oct 12, 2008)

rtztgue said:


> Not really. I can rebuild easy enough. I would hate to lose a business that is making money and doing very well, but if she forces it she is only hurting herself. As for me, I would sell off, take my share and start again and do just as well. All of that is theoretical. She could become mean and nasty but its not in her nature. Not saying she can't learn it, but so far it has been amicable.
> 
> I did speak with one of my accountants and she thought my idea was solid. Pay the ex an hourly wage, pay me a salary, and at the end of the year do profit sharing.
> 
> Now I just need to see if the ex will agree. If not, close up business, or sell her my half, buy her half, or whatever... But at least I have an offer to start with.


Are you serious! Your accountant said your idea is solid! If your wife even considers your offer then she is a complete idiot. What kind of idiot is going to accept a deal with an unknown amount of money over a judgment for an exact amount that you will be forced to pay in cash or with assets. That is why they call it a 'SETTLEMENT.' An unknown amount if money is not a settlement. As stated by yourself, you can close the business and start over again. What will stop you from closing the business as soon as your wife accepts an offer where you have that type of control. I would look for a new accountant with a brain. Why are you asking your accountant? Is your attorney a little smarter?

Your offer is insane!


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## Anti-wingnut (Mar 12, 2009)

pcplumber said:


> Are you serious! Your accountant said your idea is solid! If your wife even considers your offer then she is a complete idiot. What kind of idiot is going to accept a deal with an unknown amount of money over a judgment for an exact amount that you will be forced to pay in cash or with assets. That is why they call it a 'SETTLEMENT.' An unknown amount if money is not a settlement. As stated by yourself, you can close the business and start over again. What will stop you from closing the business as soon as your wife accepts an offer where you have that type of control. I would look for a new accountant with a brain. Why are you asking your accountant? Is your attorney a little smarter?
> 
> Your offer is insane!


His accountant would like the idea.

His wife and her team won't.


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## AGullion (Apr 19, 2015)

This situation is where you need an attorney .


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## barry1219 (Oct 8, 2011)

Just a thought...does your business require someone to hold a License? ( GC or Engineer/Architect)..is that you? if yes then I propose what I did about 9 years ago with my brother in law after I realized that it was not working out as a company.
I gave him 3 options.
1. buy me out and keep the company going. I held the license so the value of the company without me was not much going forward.
2. I buy him out and he moves on with me keeping the company.
3. We both end the company and dissolve it and we move on. Me with the license I have options. He had none.

I would suggest 1 or 3 for you. Start another company now if your separation is legal waiting for divorce to finalize it. Do not overlap any existing under contract work from old to new as this could get sticky. Instead make new contracts and establish hard timelines for all new work as to disprove any allegations of hiding income from her legally entitled to receive.
I choose option 2 in my situation and although the initial hit was financially painful I was profitable again in just over 8 months...and that was a long time ago..much better now..but I have not talked to him since. Basically I call that a win-win.


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## rtztgue (Jul 9, 2010)

barry1219 said:


> Just a thought...does your business require someone to hold a License? ( GC or Engineer/Architect)..is that you? if yes then I propose what I did about 9 years ago with my brother in law after I realized that it was not working out as a company.
> I gave him 3 options.
> 1. buy me out and keep the company going. I held the license so the value of the company without me was not much going forward.
> 2. I buy him out and he moves on with me keeping the company.
> ...



I offered my wife that depending on the valuation of the company. I might buy her out depending on what she asks. If it is unreasonable then my answer is no. OR, most likely that if she thinks it is worth that much then she can buy me out. I am amenable to that.
You raise a great point about the license issue. Yes, I am a master electrician. (electrician and company Admin) If I sell her the business she will have to hire a manager-electrician to take over. That is where I think my offer is fair as we begin to discuss income according to positions and work load. 

This really comes down to income distribution. When we were married all salary was paid to us and she, being my wife, shared in it. Now that we need to divorce we have to setup income for each of us separately. Like many businesses, you have partners who share in profit, and if a partner takes on a position within the company you pay them accordingly. If a partner comes in to clean the office as a janitor you pay them minimum wage. If another chooses to be the ceo you pay them a fair wage. And then profit sharing at the end of the year. That is why my accountant liked it. It's common practice to pay per position. 

As far as attorneys and accountants, I always get both opinions and second opinions within those respective fields. It is rare to find an attorney who really knows business and/or an accountant who knows the law. (I find the same with financial advisors. They may have great ideas, but I have to take the idea to my accountant to learn my tax consequences) Over the years I have learned to use these people as a loose team. My accountant offers one idea, is it legal? The attorney says this is legal, but is it smart business? I find that bouncing ideas back and forth is great and helpful. That is also why I am on this site.... Many of you have raised some great points that I can add to my offer and help navigate the issue. (This license issue is a good point. It helps me solidify my offer)

I think I will also look at valuation of the company with certain variables. eg. What is the company worth without me vs what is it worth without her. I will check with an attorney on the legal issue of that, but I can see the price being half the value if I am not there.


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## rtztgue (Jul 9, 2010)

Anti-wingnut said:


> His accountant would like the idea.
> 
> His wife and her team won't.



Oh, I am sure they won't like it, but as I study the issue the offer is fair. As CEO and company admin my pay should be equivalent to my replacements. If I left and she had to hire out that position, what would she have to pay them in salary? Sure she could buy me out and keep the profit, but I bet she would have to pay someone $100k to replace me. (or two people $50k each) Most likely it would be the latter as it would be nearly impossible to find one person that can both manage the company and coordinate the technicians. The jobs are disparate to say the least.


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## Metro M & L (Jun 3, 2009)

I've never gotten married. Just doesnt seem like a good deal for me. My girlfriend of 18 years wanted me to make her the owner of my company so I could be laid off when things were slow and collect unemployment. (Contractors in my state arent allowed to receive unemployment insurance). That was a pretty short conversation."NFW!!!!"


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