Expert: Timmy Chou - 3/2/2004

Question
Thanks -- yes - he is actually an "employee" of my business.  This I do know.

Also -- we are going through counseling now.  How do you actually get a divorce?  He does not want one.  How soon after can one remarry?



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Followup To
Question -
I started my own business in 1990.  My husband joined in 1997 full time.  He must now look for work because it cannot support our family with him on board full time - since he is not carrying his load.  We have a 10 year old boy and a 6 year old girl.

At the moment we are going through counseling.  Question - if we should divorce in the future (in Pennsylvania) will he owe me child support?  Also, do I have to give him any part of my business financially or not?  We are a sole proprietor and a woman-owned business (WBE) as well.

Please advise.

Thanks.
Answer -
Thank you for your question!

Mediators act as neutral third parties to disputes and never "get involved" in judging the merits of conflict, but merely use special techniques to help the parties decide how to negotiate their own settlement.

I cannot mediate this issue with you but I can offer some advice from my business consulting experience.  Note that this issue may certianly have legal ramafications and you may wish to consult an attorney.

Because of the nature of the husband/wife relationship this issue can be complicated.  At the outset I would want to define your husband's relationship with the business.  Does his name appear on official documents?  Is he an officer, director or shareholder?  Is he merely an employee?  Do you pay him as an employee and give him a W2?  

If he is an employee, he only has an employment relationship to the business and cannot easily make an ownership claim on the business.  This is where adequate records and corporate documents are important as they define the officers and decisions of the business with respect to ownership.  If no such documents exist it is tougher to defend an ownership claim in a family proprietorship.  

This leaves out the issue of the disposition of marital assets in PA family law (of which I am unfamiliar).  He may also have a claim on the business in terms of "his half your ownership", just like if you owned stock in a company.  

For your information, whenever people come to me for advice on how to start or build a business I talk about understanding the agendas of the parties.  I always urge my clients to have very specific structure designs and very specific sets of job descriptions tied to very specific rewards.  In cases of "friends", even more so, and in cases of family businesses, more still.

If you are anticipating a future dispute the need to adopt a structure is even more urgent.  

If you can get as much definition in place as possible now before the beginning of any proceeding you may be in a stronger position going forward.  Begin by crafting a concise business plan with very specific task lists and milestones and financial projections, and then identify who is going to do what tasks.  

Based on the business plan, there should then be an expected timeline of revenues associated with your business.  Compensation must be appropriately crafted from what the business can generate.  It would be best to research what comparable businesses are paying for similar job descriptions and then use this as a compensation baseline.

These are some ideas.  Feel free to follow up with additional questions.

For your general information, the pros and cons of the types of dispute resolution methods follows.

GOOD LUCK!

Arbitration, Mediation, and Litigation

Arbitration: the referral of a dispute to one or more impartial persons for final and binding determination outside of the judicial system

Benefits of Arbitration:

    Confidential, no public record
    Limited exchange of documentation, information
    Quick, don't have to wait for a court date
    Arbitrators have expertise in the subject matter and are trained in conflict resolution
    Cheaper than litigation
    Preserves business relationships

Negatives of Arbitration

    It's a compromise, no %100 winner
    Complex arbitration can be costly
    If not satisfied, may litigate the arbitration procedure
    Poor results with an unskilled arbitrator
    Both parties must agree to cooperate in the process

Mediation: the process by which parties submit their dispute to a neutral third party (the mediator) who works with the parties to reach a settlement of their dispute.

Benefits of Mediation:

    Neutral mediator can objectively suggest alternatives not considered before
    Parties are directly engaged in negotiating the settlement
    Can be quicker than litigation
    Less costly than litigation
    Preserves business relationships
    85% of American Arbitration Association cases mediated find successful solutions

Negatives of Mediation

    may not reach a binding decision
    unskilled mediator

Litigation: using the judicial system to resolve disputes

Benefits of litigation:

    a clear winner and loser
    uses a prescribed set of procedures
    more predictable outcomes
    is final

Negatives of Litigation:

    waiting for court dates can do more harm
    usually more expensive than mediation and arbitration
    part of the public record  

Answer
Sorry for the delayed response as I have been out of town.  

If your husband is merely an employee I would recommend you now take steps to formalize your business structure right away.  I would recommend you register as a limited-liability corporation in your state.  You will have to prepare articles of organization and you should also setup some operating bylaws for the company.  This will allow you to formally "set-aside" the business and its assets and articulate the "owners" and the rules for receiving ownership.  Keeping careful corporate records and observing the rules of corporate governance will help to establish the business ownership and independence from the marriage.  As far as child support is concerned he will have court-defined child support obligations that will be indexed to his current employment salary.  The court has a formula for determining how much is required.  You may be able to get a copy by calling the court clerks office.  

Alimony however, is not set in stone and would have to be figured out.  His salary history will come into play but will not be the sole determining factor.

Of course I am not an attorney, however a divorce is much like a lawsuit.  You would hire an attorney and file paperwork "suing" for divorce.  Once filed the papers are served by a process server or constable.  Then he will be required to respond to the issues raised, or face having the court just decide what to do without any input from him.  The length of the process depends on your state laws.  Some states require six months or more, and may require assessment by a court therapist, etc.  Some states are a slam-dunk.  If there are children involved the process will be more complex as the court has a stake in seeing that the children's interests are served.  

If possible you will be much better off if you can negotiate the divorce terms in mediation before presenting the case to the court.  You will save a ton of money and it will take less time.  Family mediators are good at this and can help you.

Once the judge is comfortable with the terms of the divorce it will be made final.  As far as I know there is no waiting period before marrying someone else right away in most states.  

Hope this helps.