R. Shawn McBride recently spoke about updating by/sell and how divorce can affect your business.
Hey, everyone, R. Shawn McBride with you here live, and we’re talking about updating your buy-sells. Now some of you may have seen this video series that we’ve been doing. We’re on part six now. If you’ve missed the earlier videos go to the R. Shawn McBride public page or the McBride for Business YouTube page so you can catch up after you watch this video.
But today we’re talking about what are those things we need to deal with in every buy-sell, every partnership agreement. Ideally, we deal with these things the first time when we build a partnership agreement, or we build an LLC or a corporation the first time. We really want to get these things in there. Sometimes we miss them.
Business evolves. We can go back and fix these things, and one of the things we’re talking about is updating your buy-sell. There is a good time to do this, and this is when things are going smoothly, your business is growing, you have a lot of wealth locked up in there, you’re making a nice solid income off your business. You’re feeling stability. It’s a great time to go back and update that buy-sell with your partner. Just get together, talk about the eventualities. Really lay a solid foundation that way. Both of you can rest or all of you, if there’s more than two, can all rest assured knowing that you have a solid plan in place.
What we’re gonna talk about today is divorce. And divorce can have a lot of unexpected effects on a business. A lot of times when partners come to me one of the issues that are causing it is a divorce. Courts don’t really get too nuanced usually about business partnerships in a divorce setting. They just look at them, they say oh, wow, one of the partners are getting divorced, and they own part of this business, let’s just divide it between two spouses.
In extreme cases, like one I’m working on recently they will just hand it to one’s spouse. They use this as something to make the equal division work. One spouse was running the business, after a divorce, a different spouse got full ownership of the business because the court just used that as a balancing factor. A complete radical shift for my client who was a partner in that.
So, we really wanna be thinking about happens in the event of divorce. Radical ownership changes. Like in a new partner, you have divorced people as your partners. You go from three partners to four, two of them are divorced, so they probably aren’t agreeing to a lot, and we’ve got a problem.
So, we wanna be building plans in place for divorce, and usually, this looks like a buyout. In the event one of the partners starts to go into a divorce situation, we have a buyout either of that partner or of their perspective or their spouse, so that we don’t get an unexpected owner, and so the business stays stable.
So, we really wanna do some advanced planning for this. Really easy to do on the front end before people get into a divorce situation, and it’s usually easy to socialize with the spouses because you say this is part of our business planning, it’s really not about me getting a prenuptial with you in case we get divorced, it’s my business partner wanting some assurance in case something goes wrong in our marriage.
So, a lot of the partners are very easily able to get that going but you have to do it before the divorce starts pending. Once that divorce is pending it’s very hard to negotiate these things, so get ahead of the ball, get that updated, get that into your buy-sell.
So, hopefully, you’ve checked out the other videos in our series. If you haven’t, go backward. The R. Shawn McBride public page on Facebook, the McBride for Business YouTube channel each have copies of these videos, so watch them. Get to know about all the different series. Reach out with any questions. McBride for Business blogs will get you great content about how to do these types of things, along with blogs on my law firm website, McBride Attorneys. Take a look around. Find some great articles and resources.
Let us know how we can help you with your planning for your partnerships and getting your buy-sells in order. We’d love to hear from you about the issues you’re facing. And of course, subscribe to the YouTube channel. Check out our videos, and keep in touch, and share this resource with other business owners, so that they can see it as well. I’ll see you soon. Shawn McBride signing off.
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This posting is intended to be a tool to familiarize readers with some of the issues discussed herein. This is not meant to be a comprehensive discussion and additional details should be discussed with your attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. Each case is unique. Past results do not guarantee future outcomes. This article should not be treated as legal advice to any person or entity. Freeimages.com/photographer Miguel Fonseca.
About the Author
R. Shawn McBride is the Chief Innovation Officer at McBride For Business, LLC. His signature keynote, The 3 Laws of Empowerment , gives audiences an entertaining look at how they can prepare, plan and protect themselves. You can reach R. Shawn McBride at firstname.lastname@example.org or (214) 418-0258.
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