Special Considerations for New Orleans Family Business Owners Who Divorce

Special Considerations for New Orleans Family Business Owners Who DivorceFamily businesses make up a large portion of the economy in New Orleans. Due to the influx of visitors and tourists to the area, these businesses are known to last from generation to generation. Therefore, if you are a family business owner in New Orleans, you likely have a strong sense of pride knowing that you and your family have built a successful company through hard work and dedication.

Whether you created the business with your spouse or your great-grandparents established and passed the business down to you, you likely have plans to pass it down to your children as well. However, when divorce arises and your family business is at risk, it is important to know that there are special considerations to help you protect and keep your business during one of the most challenging times of your life.

How does divorce affect my family business?

Often, a divorce can be completely unexpected, which means that you likely did not prepare for the possibility of ever ending your marriage. However, even if the divorce was not unexpected and you saw it coming for years, it can be one of the most challenging events that a person can go through. The reason for this is that the divorce process consists of many different factors that you must address, such as child custody, child support, property and asset division, finances, and more.

Therefore, when you throw a family business into the situation, it can begin to feel overwhelming. Generally, both spouses will be required to explain what type of involvement they have had in the family business, what type of involvement they would like to have going forward, and how they think it can be financially divided. While this might seem easy and straightforward, the truth is that it rarely ever is and many family businesses find themselves closing.

The property division laws in New Orleans

Louisiana is a community property state. Therefore, all property and assets obtained during a marriage is treated as community property, which means that both spouses own it. If you created a family business with your spouse in New Orleans, you both have equal rights to the business. However, if you were given the business by your parent, grandparent, or another family member before you became married, it would not be considered community property. As a result, the family business would be considered separate property and only belong to you.

Keep in mind that even if the business is considered separate property, there can be other issues that involve your business during the divorce. For example, the income that you earned from the business during your marriage could be seen as community property.

How do I find out the value of my family business?

Before the divorce proceedings begin, you should know the value of your family business. Depending on what type of business you own, it could be very complicated to determine its value. However, your attorney will likely work with other professionals who have experience in business valuation to get an accurate numerical value for your business. There are many different elements of your business that will need to be considered and evaluated, such as:

  • Its future earning potential
  • Management
  • Capital structure
  • Market value of its assets

What should I do to help protect my family business in a divorce?

There are several different steps you can take to protect your family business in a divorce, including:

  • Look over all business agreements you have: The first step you should take is to look over any business agreements that you have. If you have a document showing that you created the family business or received the family business as a gift or inheritance before the marriage, you can use this to show that it is separate property.
  • Ensure that you do not have a prenuptial agreement: Many business owners create a prenuptial agreement with their partner to protect their property before they get married. This can help that if the marriage ends in a divorce, the business is still considered to be yours. As long as your spouse signed and agreed to the factors in the prenuptial agreement, it will be acknowledged and upheld in court.
  • Create a postnuptial agreement: If you know that your marriage is going through challenges or on the path of divorce, you can create a postnuptial agreement and ask your spouse to sign it before the divorce process begins. A postnuptial agreement is similar to a prenuptial agreement, except it is established after you are married. In the agreement, you want to explain that the family business will remain in your possession once the divorce is finalized. THIS CAN ONLY BE DONE THROUGH THE COURT AND REQUIRES A HEARING – so it is not a simple agreement.
  • Prepare to buy out your spouse’s share: Since Louisiana is a community property state, the courts try to divide all property and assets equally. However, because you cannot cut a business in half and give half to one spouse and the other half to another, the court will likely divide the business by interest. Therefore, in order to get the entirety of the business back, you may need to buy out your spouse’s share. You can do this by giving your spouse a lump sum payment, or you can request to make payments each month until you have paid off their interest in the business.
  • Think about what you could trade with your spouse: If you do not have the money to buy out their interest in the business, another method that may work is to consider trading something that they might find valuable. For example, you may be able to give them the vacation property, the family home, the boat, the art collection, or the vehicles for their interest in the business.
  • Agree to continue working with your soon-to-be ex-spouse: One of the simplest but most difficult ways to keep the family business is to agree to continue working with your soon-to-be ex-spouse. This may be challenging if you do not get along. However, if you are both able to be cordial, the business relationship does not have to end because the marriage did. If you choose to do this, it is recommended that you develop agreements regarding who gets the business when one or both of you pass away, who gets the business when you retire, and what type of business responsibilities are expected of each ex-spouse. This will not only ensure that the business is protected in the future, but it will also help you both establish a professional working relationship going forward.

Are you worried about how to save your family business during a divorce? If so, the New Orleans divorce lawyers at the Law Office of James A. Graham are here to help you learn your options. We will help you determine how much your business is worth, whether it is community or separate property, and how you should approach your spouse on the topic. These types of cases can become complex very quickly, which is why you need an experienced, skilled, and knowledgeable attorney to help you protect your rights during the divorce and after. Please call our office or complete our contact form to schedule a confidential consultation today.