Divorce Process

What Business Owners Need to Know About Divorce

So you are getting a divorce, but you also have a business to worry about. We are going to go through the top 10 concerns coming from business owners concerning their divorce.

There are a lot of misconceptions about divorce. Divorce conjures up images of movies such as Kramer v. Kramer, where the parties engage in a protracted custody battle or War of the Roses, where the parties literally kill each other.

Surprisingly, it is the divorce lawyer, Gavin D’Amato (Danny DeVito) in War of the Roses who was most prophetic when he tells Oliver Rose, “There is no winning in this, its only degrees of losing!”

However, D’Amato was incorrect. Had the Roses pursued an amicable divorce, and employed methods such as collaborative divorce or facilitative mediation, they could have crafted a win-win solution that kept their entire house intact. Of course, it would have made for a very boring movie.

Myth #1 – The divorce has to be expensive.

Your divorce only has to cost as much as you and your spouse want it to cost. By avoiding litigation, you can avoid much of the cost of a typical divorce. Most of the expense is incurred during discovery, the information gathering stage of the case. Simply by voluntarily exchanging financial documents, the parties can save unnecessary expense. Further, the parties may agree on using one business evaluator, instead of hiring competing experts.

Myth #2 – The business records will become part of the public record.

By staying out of the courtroom, your business records will remain private. In a collaborative divorce, the parties and their attorneys agree to exchange any necessary documents and to conduct all negotiations in four-way meetings with all of the parties present. If the parties need to evaluate the business, the parties will agree on a valuator to bring into the process to provide assistance to both parties. Since the entire process remains private, the business records remain private.

Myth #3 – The divorce will be disruptive to the business.

Just like other areas of your life, it is your choice how disruptive the divorce will be to your business. If you choose to litigate, you will frequently have to take time away from the business to go to court, go to the Friend of the Court, meet with your lawyer or complete tasks related to the divorce. However, if you decide to have an amicable divorce, you can avoid court scheduled hearings and you can have input into when meetings are to be scheduled and the pace of the negotiations. Most importantly, by taking much of the stress out of the process, it will be easier to concentrate on your business.

Myth #4 – The divorce has to be litigated through the courts.

The law requires that a Complaint about Divorce is filed to start the process and that a Judgment of Divorce is entered at the conclusion for the divorce for the divorce to be effective. But how you get from Point A to Point B is up to you and your lawyer. In Oakland County in 2005, 4068 divorce judgments were entered. Of those, only 38 went to trial. Therefore, since the odds of going to trial are remote, I recommend other avenues toward a settlement. In Collaborative Practice, for example, the parties actually sign a contract agreeing to stay out of court. In fact, the contract states that if either party wants to stop the negotiations and go to court, the lawyers will withdraw. This provides an incentive to the parties to stay at the table and a disincentive to the attorneys to muck up the process so they can get a larger fee.

Myth #5 – The parties are best served by an aggressive, "pit bull" attorney.

Ask 10 divorce lawyers to predict the outcome of a typical divorce and 9 will tell you that, in Michigan, the courts generally divide the assets 50/50. If the courts are predisposed to divide assets equally, why is it necessary to hire an aggressive attorney? Many attorneys will tell you that you need to be aggressive so you can negotiate from a position of strength. However, in my experience, the only certainty is that aggressive actions by one party result in equally aggressive responses, causing the hostility to escalate.

Myth #6 – That both parties will have to spend money on hiring separate appraisers, CPAs and other experts.

In litigation, each party usually hires their own expert to valuate the family business. Each party could pay $5,000 – $20,000 to their respective expert. And since the Judge will presume that each expert will skew the numbers in favor of their client, frequently the Judge will split the difference between the appraisers. In an amicable divorce, the parties can agree to split the cost of an appraiser and agree to utilize the results. Splitting the cost of experts can greatly reduce the cost of your divorce.

Myth #7 – The divorce process must be long and drawn out.

Michigan law provides that you must wait 60 days from the date of filing to enter the Judgment if you do not have minor children and 180 days if you do have minor children (and under certain circumstances, the Judge may waive the 180 day waiting period). If the parties cooperate, there is no reason why the divorce cannot be completed as soon as the waiting period expires. In many divorces, the longest delays are creating during discovery, where parties send Interrogatories to the other party and subpoena countless documents. Frequently the documents can be exchanged by the parties much faster without a formal discovery request. By working collaboratively, the divorce can be completed much quicker than it can in litigation.

Myth #8 – The divorce process has to be contentious.

In our experience, once most people decide they want a divorce, they would like the process to be completed as quickly and efficiently as possible. But the common misconception is They must hire the most aggressive lawyer and must dig in for a long, contentious battle. I believe The parties should dictate the tone and pace of the divorce. Therefore, we encourage our clients to try collaborative practice or mediation as methods to reduce the animosity and to keep the parties focused on reaching a fair solution.

Myth #9 – The parties must go to mediation only at the end of the case.

In a typical divorce, the court will order the parties to attend mediation just prior to trial. Therefore, the parties engage in discovery, will have to appear in court at least twice, at the Friend of the Court at least once, not including any motions filed by either party, before engaging in serious settlement discussion. I prefer to attend mediation at the beginning of the case. By doing so, we can establish lines of communication and set a positive tone for the remainder of the divorce. Frequently, we can resolve some of the minor issues in the case and make decisions about what information is needed to complete the case in order to save time and money. Further, by retaining a mediator, a process is already in place to help resolve further disputes without going in front of the Judge.

Myth #10 – That both parties will be financially poorer after the divorce.

(One party doesn’t have to suffer) I admit that this one is a stretch. However, in an amicable divorce, the parties spend more time negotiating instead of litigating. Since every divorce is unique, this allows for more creativity in crafting a settlement than you will get in court. You could arrange for longer term payouts, exchanging dissimilar assets (equity in the home for retirement accounts) or any other arrangement that works for you. While you cannot create a bigger pie to divide, you can create a financial win-win solution.