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Divided We Stand

When business owners divorce, what happens to the company?

It's no secret a divorce affects more than the two people calling it quits. Children, in-laws and friends find that nothing is quite the same afterward. The same goes when the divorcing couple owns a business--almost certainly, they won't be able to keep doing business as usual.

"There are some rare cases [I've seen] where the parties don't get along in marriage but can in business," says family law attorney Gregg Herman of law firm Loeb & Herman Service Corp. in Milwaukee. In those cases, Herman arranges for each ex-spouse to retain 50 percent of the ownership, then makes sure they have a very good shareholder's agreement with a buyout provision in place, in case it doesn't work out. But that's the exception. "More commonly," he says, "you have to do two divorces: first the marriage, then the business."

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This article was originally published in the May 1998 print edition of Entrepreneur with the headline: Divided We Stand.

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