The Most Important Business Deal of Your Life?

When you think of a business deal, you may think about the stakeholders coming together and professionally hashing out a rational agreement that is as mutually advantageous as possible for all the participants. Images of men and women around conference tables working through details and terms, while considering the cost-benefit analysis of important decision points, may come to mind. The conversation may, at times, become difficult, given competing interests involved, and the deal may even fall apart rather than be consummated, but at the end of the day, all the stakeholders go home to their personal lives.

Now imagine a business deal in which there is no home for the participants because dividing up home is part of the business deal. And on top of the normal rational analysis employed in a business transaction, add one (or more) broken hearts on opposite sides of the conference table.  Suddenly this deal, which may have been complicated to start, becomes substantially more so just in terms of the emotions infused into the situation.

Yet for many divorcing couples, the proceeding is still the most important business deal of their lives and should be treated as such. 

In any divorce, the couple must not only allocate parenting time and responsibility for making decisions for any children of the relationship, but they must also divide their combined marital estate, which includes not only the marital home, credit card debt, cars and bank accounts, but any business interests owned by either spouse (or both, in the case of a joint family business), investments, retirement assets, certain executive compensation benefits (such as stock options and restricted stock), certain kinds of trust interests and business debt. On top of dividing up the assets and debt, tax issues need to be resolved and the matter of family support, including spousal maintenance – commonly known as alimony – and child support must also be resolved.  One or both spouses are likely to leave the marriage with less wealth and a reduced share of income than the couple enjoyed as a unit. 

When there is a business interest to be divided in a divorce, the deal becomes even more complicated:

Is the business sold to a third party, leaving cash to divide? 

Is the business valued (and using what valuation standard and methodology) and allocated to one spouse, and, if so, how is the other spouse given his or her fair share of the marital estate in those circumstances?

Is it fair for the business-owner spouse to not only share in the business value, which may be potentially derived, at least in part, from the income generated by the business, but also to share his or her income going forward from the business in the form of spousal maintenance and/or child support, and, if so, how much?  How much working capital and ongoing cash flow does the business need to continue to survive and even thrive, and how should that be balanced with the non-owner-spouse’s needs for cash flow and assets to meet his or her own personal needs?

There is no corporate liability shield protecting divorcing spouses from each other, yet the consequences of the financial decisions of divorcing couples can reverberate for the rest of each spouse’s life, making this “personal” business deal one of the most important deals of both spouses' lives, no matter how successful each may or may not be in business otherwise.

It is crucially important to do the best deal possible in a divorce, starting with civility. Divorcing spouses rarely like each other, or they wouldn’t be separating in the first place; however, that doesn’t mean that basic civility and courtesy should be ignored. Furthermore, in Colorado, divorcing spouses stand in a fiduciary relationship to each other. One retired Colorado judge explains this duty as thinking about the other spouse’s needs first. 

Due diligence is also just as important, if not more so, in the context of a divorce, as it is in business. Not only could you be left with a bad deal if you don’t get enough information in your divorce, but you could be thrust back into litigation for up to five years. Colorado law provides a five-year look-back in the event that certain financial disclosures are not properly made at the time of the initial divorce. Having all the information, as well, opens the door for greater creativity (or, in a situation in which civility has broken down and the parties have to litigate the end of their marriage, provides the opportunity for the lawyers to make better, more compelling arguments and offer the trial court a better opportunity to get to a fair outcome), which, just as in business, can offer more “win-win” solutions.

Perhaps most important, though, is to treat any divorce as much as possible like a true business deal. In Colorado, who was at fault for the end of the marriage (indeed, even which spouse filed for the divorce) is irrelevant, and general bad behavior rarely matters in the final outcome. As hard as it is to put those bad feelings aside, it will lead to more rational, reasonable, and equitable outcomes than litigating emotional hurt in the family courts. Just like in a business deal as well, be precise, specific and clear in written agreements so that there is no room for confusion (and potentially costly litigation over inconsistent interpretations of the agreements down the road) and further conflict. Lastly, no rational business person would go into a deal without the professionals needed to consummate the deal and provide necessary advice during the negotiation process (and those needed professionals can come in many categories in the divorce context, from mental health professionals to realtors to lawyers and accountants depending on the case’s needs), and a divorce should properly be treated no different. 

Your divorce may be, after all, the most important business deal of your life.

A shareholder at Griffiths Law PC, Carolyn Witkus specializes in high conflict and complex asset cases. These include dissipation and separate property claims, as well as trust and oil and gas issues. Ms. Witkus is an active member of the Colorado Women’s Bar Association and the Colorado Bar Association Family Law Section. She has been awarded Colorado Super Lawyer® “Rising Star” from 2013 to 2018.