Business owners face unique challenges when going through a divorce. Here's what you should know

Although research varies, it is estimated that anywhere between 40% and 50% of marriages end in divorce. A divorce can be emotional, painful — and expensive. And if you’re running a small business, it could have a significant impact on your cash flow.

If you own a small business, here are few things to consider:

Get your books in order

It’s important to make sure your books are as clean as possible. Many business owners I know mix too many of their personal and business expenses, usually due to sloppy bookkeeping. During discovery, an opposing attorney can request just about anything related to your business, and this could put you at a disadvantage during negotiation. Pennsylvania laws, in particular, can “tend to be on the liberal side” regarding what documents can be requested, according to Linda Kerns, a family law attorney based in Philadelphia.

“A spouse can request all the details of your business even if they don’t own the assets,” Kerns said. “When you go through a divorce, you’re putting a microscope on your business and on your accounting habits and if small discrepancies are found, they can blow up into bigger headaches.”

Consider an arbitrator

Both Kerns and John Zurzola, a divorce specialist and partner at Weber Gallagher in Philadelphia, say that arbitration — where you hire an independent attorney or judge — may be the best and most cost effective route for a divorce negotiation. Kerns says that in arbitration, all matters are private and not subject to reporting. Zurzola agrees that arbitration tends to be a smoother process and “hopefully” results in a more fair settlement.

“It would be beneficial to the business owner if a neutral arbitrator has knowledge in an industry, particularly if the business is technical,” Zurzola said. “Otherwise you’ll need to educate the court on how the business works, and this could lead to asset valuation problems.”

Your cash flow will be affected

Consider the impact that your divorce will have on your future cash flow. Whereas your business might fluctuate depending on the season or your projects and customers, a divorce settlement — particularly when there’s alimony or child support — requires a consistent payment being made.

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