What can we do to ensure that ownership of the business remains completely within the family, even after the death, divorce or bankruptcy of a family member?
A written agreement is particularly important to avoid a dramatic change in the family’s exclusive ownership of its business as a result of events outside of the family’s control. For instance, absent such an agreement, if one of the family owners divorces, a hostile ex-spouse may be joining family members at the ownership table, demanding an unexpected and unaffordable buy-out arrangement. Also, the personal bankruptcy of a family owner (or the bankruptcy of the spouse of a family member) could leave that member’s creditors with a claim against his or her equity stake in the family business. And, if a family member dies prematurely, the grieving spouse and children may be left with an illiquid, unwanted stake in the business, instead of much-needed cash. For a more detailed discussion, see “All in the Family”.
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