Spin-Offs, Split-Ups, and Break-Ups: Assisting Clients with Business Divorces

Business ventures have long been likened to marriages. At the onset, business owners enjoy a harmonious relationship, envisioning a future with limitless possibilities and nothing but smooth road ahead. Reasons for business divorce are many, including communication breakdowns and inflated egos, diff...

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Bibliographic Details
Published in:Pennsylvania CPA Journal 2005-10, Vol.76 (3), p.28
Main Authors: Feder, Robert D, Jones, G Daniel, Archer, Kiersten S
Format: Article
Language:English
Subjects:
Accumulated adjustments accounts
Business ownership
Buy sell agreements
Discounts
Divorce
Fair market value
Fair value
Funeral homes
Intellectual property
Manufacturing
Punitive damages
Splitups
State court decisions
State laws
Stockholders
Tax avoidance
Tax planning
Trials
Valuation methods
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Summary:Business ventures have long been likened to marriages. At the onset, business owners enjoy a harmonious relationship, envisioning a future with limitless possibilities and nothing but smooth road ahead. Reasons for business divorce are many, including communication breakdowns and inflated egos, differences in business philosophy, and changes in personal circumstances, such as divorce, disability, insolvency, or loss of professional license. With the help of competent professional advisers, owners should evaluate all possible scenarios in planning a business divorce. Reorganization often is preferable to liquidation because of the tax consequences, and tax avoidance strategies are key elements of any reorganization. A buy-sell agreement outlines exit methodologies, reducing the potential for conflict in the event of a split-up. The agreement should clearly state what will happen if the owners want to split, and should outline roles and expectations of the parties, money to be spent, and decisions to be made in the event of divorce.
ISSN:0746-1062