Many people find it very difficult — and sometimes nearly impossible — to go through a business divorce. Each shareholder has many questions that need to be addressed from their unique perspective. One question often leads to 3-4 others too. If the questions remain unresolved they continue to mount. Then, fear, uncertainty and doubt begin to set in as to whether the shareholders will ever finalize their business divorce.
If people experience no movement in the process, their trust in the process and hope for a resolution drops through the floor. They wonder how they got in this position in the first place and why it is so challenging to break away from their shareholders.
These thoughts fuel concerns how to successfully move towards the next chapter in their lives. All of the shareholders still want change to happen. They are just unclear how to get there. Below are some reasons why shareholders end up at numerous dead ends in their process.
Some reasons why shareholders arrive at dead ends in their business divorce process
When shareholders begin to think about separating from one another they are not sure who to call for help. It is quite common for shareholders to select a professional (and therefore a process) that does not help them move through their business divorce process in a diligent manner. Why? Shareholders are unclear about the type of due diligence they should do before they select an advisor. Although executing a business divorce sounds like it would be fitting for certain advisors, in reality many aspects of business and life require someone who has unique expertise which is not always easy to find.
The first logical choice that shareholders think of is their CPA. This assumes their situation is not heading toward litigation.
CPAs openly share their daily work focuses on preparing financial statements and tax returns, not business divorces. As a result, CPAs often decline this type of work. They know that things can get messy very quickly. One decision could lead them into hot water which could jeopardize their client relationships and referral sources. Basically, the risk is not worth the gamble to work on a project that could disrupt their regular annuity stream.
When shareholders discover this dead end they look for the next open door. The next logical choice is their corporate attorney. Corporate attorneys openly share their expertise is grounded in the legal aspects of a business. More specifically around defining shareholder’s legal rights, facilitating legal type discussions and drafting legal documents. If shareholders engage an attorney without first having clarity around their financial solution they likely started the conversation too early. Why?
To effectively perform their role, a corporate attorney depends on someone who has expertise with business divorces. Corporate attorneys openly share they look for someone who understands how to craft a business divorce strategy, how to manage ever-changing financial risks, among other aspects that arise in a business divorce that are beyond their core training.
Prior to engaging an attorney, all of the shareholders need to arrive at a fair and equitable financial agreement. They have to understand the financial terms and conditions of the agreement along with the risks and implications associated to it. They want to pre-experience the outcomes of the agreement in financial terms too.
Until the shareholders gain clarity as to how their business divorce should be designed, financially speaking, they will not be in a position to articulate their wishes or desires to be captured in a legal agreement. Reality tells us, to make progress with anything in life, we have to choose the right people who have the right skills and the right processes to help you get from where you are today to where you need to go. This applies to business divorces too.
Without the right people or the right processes your business divorce will drag on and you may unexpectedly arrive at a standstill. Unfortunately when you try to get the engine moving again things continue to stall. It comes back to the same theme. You need the right people with the right processes to help you get to where you want.
About the Author
Larry Smith is a Founding Partner of Divorce Outcomes, a specialized professional services firm that manages all of the financial aspects in a divorce process. Since 2003 he has worked as a trusted financial advisor, financial advocate, divorce architect and technical financial expert; he is not an attorney. He is an alumni of KPMG and Andersen with expertise in technical accounting, forensics, sophisticated taxation, management consulting, risk management, advanced process engineering, business combinations, divorce management, multi-party negotiations, advanced quality analytics and cognitive performance technologies. Since 1986 Larry has been advising individuals and organizations about innovative financial solutions to resolve complex financial challenges that arise in life and in business.
For both personal and business divorces, Larry is considered an expert in divorce strategies, divorce process management, financial divorce architecture, financial risk management, taxation for divorces, financial divorce forensics, advanced divorce analytics, financial divorce negotiations and mediation, business valuations and sophisticated equity structures. He helps clients shape complex financial decisions, manage communication risks and ever-changing negotiating positions to strategically preserve or grow wealth from these types of transactions.
If You Have a Question
If you have a question, feel free to contact me at [email protected] or 617-680-5222. The call is free. I will spend 30–60 minutes with you. I will provide you an honest assessment as to where I think you are positioned in your divorce process or answer any questions you have. I may provide you some guidance, insight or advice that you can take with you as you wish. There is no obligation to move forward. The phone call is designed to ease your fears, provide you some options to pursue and a potential road to run on that can lead you down a path to achieve a successful outcome.
About Divorce Outcomes
Divorce Outcomes is a specialty services firm that helps people both domestically and internationally manage all of the financial decisions that arise in their divorce process. We are not attorneys. We are financial experts who partner with our clients as their personal financial advocates. We help our clients manage their divorce process, uncover hidden financial risks, architect divorce solutions, manage ever-changing negotiating positions, communicate complex financial matters and close the divorce process as soon as possible with a goal to arrive at the best outcomes possible. Throughout the process we evaluate the current state of our clients’ financial lives with an objective to best reposition their future. We do not sell any products. We simply raise issues that are in our clients best interest. Our clients share with us we:
- unfold, analyze and repackage their financial life so they are well positioned after their divorce
- preserve the value of their business or marital estate
- continuously strive to provide a return on our services
- build balanced financial solutions grounded in evidence
- find ways to make our client, and at times both parties, money through the process
- design their divorce to work for them and their family’s life
- provide mental clarity to make decisions
- reduce the total process time from start to close
- minimize the stress and unpleasant memories that can last a lifetime
As we reach an agreed upon settlement structure, we help our clients identify a fitting attorney who can leverage the financial solution to draft and record the requisite legal documents. Where outcomes are at risk from a traditional process, we function as expert financial negotiators or financial mediators to turn around the situation and achieve our client’s desired outcomes.
This communication is for general informational purposes only which may or may not reflect the most current developments. It is not intended to constitute formal advice or a recommended course of action as every person’s situation is unique and different. The information here is not intended to be, and should not be, relied upon by the recipient to make a decision without professional guidance.