
Ask HN: How do you handle divorce as a startup owner? - losingitall
Without making this a &quot;woe is me&quot; tear jerker, the short story is that my over-a-decade marriage is ending, in the state of Massachusetts.<p>I have a successful company I started almost 10 years ago with a partner and have a very good salary.  MA&#x27;s divorce and alimony laws are pretty straight forward (if arguably unfair in many circumstances...), and I will end up paying ~32.5% of the delta of our incomes for ~8 years as alimony.  In addition to that, we split all current assets 50&#x2F;50.<p>That includes my shares of the company.  We have a recent valuation done which indicates some significant value.  If I got another valuation done for this divorce i could probably present data that would push that down, however she could also get her own done and I&#x27;m sure push the value up, so we&#x27;ve agreed to the existing valuation (for now).  MA doesn&#x27;t allow for the normal &quot;discounts&quot; for divorce (lack of control, and lack of marketability) so in theory I owe her 50% of the theoretical value of my shares.  I don&#x27;t have that kind of money, and I have no way to actually turn my shares into cash.  So it seems like I&#x27;m going to end up owing her a large amount of money.<p>If she &quot;lets&quot; me pay that amount off, interest free, over the term of the alimony (8 years), then I will be working my usual high stress 50-60 hours&#x2F;week keeping my company going, and my wife will end up with approximately 2x the money I do, for the next 8 years.  I would also be legally prohibited from just quitting and working as a mechanic (or some other lower stress lower paying job).<p>I don&#x27;t think I can do that (mentally&#x2F;emotionally&#x2F;morally).<p>Has anyone been through anything similar or have any advice?  My (very highly respected and expensive) attorney unfortunately feels that the MA law is super simple and I&#x27;m basically just screwed.  Looking for alternatives that aren&#x27;t awful.<p>Help?
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dbg31415
My uncle went through a similar situation. He owned a company and got
divorced, he had to pay her out the valuation of the company, just like he had
a mortgage. What's worse, she went to some stupid get all your money in one
lump sum place and instantly lost like 60% of the value. So in addition to
losing money to interest he had to live with knowing that his kids only got
40% of what he was paying.

It taught me that it's important to have a prenup. There are things that
should be communal assets, a company is not one of those things.

Any way to just close the company down and then re-found it with your
partners? Or structure it so that they "fire you" or buy you out for a
fraction of the value and then give you equity bonus on rehire? I don't know
if any of these things are legal, but after seeing how miserable my uncle was,
I would go to extreme lengths to avoid being in a situation where I had to buy
my own company back from my ex-wife.

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allfou
It's not about the value the day you file for a divorce. It's about the value
he had during the marriage period. Selling shares right now won't change much.

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losingitall
To be clear, I'm perfectly happy(?) to help give her a solid foundation to
start the new life she feels she needs. I want her to be able to be successful
and feel fulfilled, etc... However, I'm losing almost everything I've built up
as my "life" (house, marriage, dog, 1/2 our friends, my best friend/wife, will
likely have to move somewhere with a much lower cost of living, etc...), and
it feels like I'm also losing my freedom or ability to build a new life for
the next 8 years (unable to quit, working 60 hours a week and taking home a
fraction of what I'm earning, etc...).

~~~
allfou
It seems odd that you owe the actual cash money. Are you %100 sure about that?
50/50 is not related to the value of the shares but the shares themselves.

In this case (you don't owe any cash), even splitting your shares in half
might end up in a big pile of cash if your company is really successful.

That sucks though...

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JSeymourATL
> My (very highly respected and expensive) attorney unfortunately feels that
> the MA law is super simple and I'm basically just screwed.

It may be worthwhile getting the legal equivalent of a 2nd opinion. Consulting
another lawyer could be a smart play. They may confirm your attorney's advice
or suggest some alternate suggestions. Also, mediated divorce settlements may
be an option to explore. Here's a list in Massachusetts >
[http://www.mediate.com/Massachusetts/](http://www.mediate.com/Massachusetts/)

~~~
losingitall
We are in mediation (trying to avoid a contesting filing), however she's
unwilling to give up any money she/her attorney believes she can get under MA
law. The law appears to be solidly on her side.

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saluki
With this much on the line I would get a few second opinions from other
lawyers.

I would look at doing a 50% profit sharing of your current and future earnings
from your company with her and 50% of profits from any sale in the future, she
might make more in the long run but you aren't paying 50% of the current value
over 8 years.

Talk to more lawyers to make sure you get the best setup possible.

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pja
Well, you’re in a negotiation.

Either you buy your wife out of her share of the business based on current
valuations or you can transfer half of your share holding in the business to
her, if the latter is even possible. Or something in between. No easy answers
unfortunately.

Do you think you can grow the business? How recent is the "recent valuation"?

~~~
losingitall
Recent = last year. We're bigger now, but our market has changed dramatically
and we'll need to pivot/diversify successfully in order to avoid fading away
in 2-3 years. So 8 years down the road seems like a total guess... We could be
doing great or we could have been out of business for 5 years...

I am exploring transferring 1/2 my shares to her, which is less than ideal for
a lot of reasons, but I suspect she and her attorney will fight to reject that
(as it doesn't give her any cash). Not sure if it's possible or not. Downside
of course is that then I'm in business with my ex-wife. As is my partner. Not
ideal. But perhaps better than the alternative of paying her out over 8 years
on top of the alimony...

~~~
pja
_We 're bigger now, but our market has changed dramatically and we'll need to
pivot/diversify successfully in order to avoid fading away in 2-3 years._

So effectively you’re asking whether you would invest a big share of your
income over the next 8 years to buy more of this company as it is now, with a
high risk profile. That’s a tough choice.

Any likelihood of raising capital in the near future to fund expansion /
pivot? An ideal outcome would probably be to sell them your wife’s shares as
part of the deal & buy her out that way. Would be tricky to get everything to
line up though.

 _I am exploring transferring 1 /2 my shares to her, which is less than ideal
for a lot of reasons, but I suspect she and her attorney will fight to reject
that (as it doesn't give her any cash). Not sure if it's possible or not.
Downside of course is that then I'm in business with my ex-wife. As is my
partner. Not ideal. But perhaps better than the alternative of paying her out
over 8 years on top of the alimony..._

You don’t know until you make the offer!

Something to watch out for: you’ll be paying off her share of the company out
of taxed income. Make sure the numbers work for you: worst case, she earns
nothing & that 32% + the fixed payment exceeds your income after tax +
necessary expenses. This would be a bad outcome...

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Red_Tarsius
I'm so sorry for what you're going through. I can't offer any legal advice
other than consulting another lawyer. Alimony is state-enforced theft and
often ruins (male) lives, so you have every right to feel upset. Whatever the
outcome, please keep us updated: we care about your well-being.

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sharemywin
you can sell the business.

or maybe your partner is interested in owning more of the business?

At the end of the day your buying out a partner over 8 years. At which time
the company will probably be growing and become worth more.

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rajacombinator
Sounds like you have a bad lawyer. Surely and agreement can be made that
doesn't require you to give her cash upfront for your stake in the company.

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Mz
So, I was the wife/homemaker and he did not have a startup. We had an amicable
divorce, in part because I wanted to keep lawyers out of it and I have had a
college class on _Negotiation and Conflict Management._ Given that we did not
have much money, I did not want the lawyers bleeding us for money we could not
remotely afford. So I did a lot of steering that to make it as painless as
possible for all parties. He was cooperative, but I at times agreed to things
that were a convenience for him because I understood that screwing him over
was absolutely not in my best interest.

But if you are negotiating with an idiot who does not understand that bleeding
you is a bad negotiating tactic, you need to get better at a) negotiating
tactics and b) communicating to them why this is not in THEIR best interest.
Don't talk about what you need/want/feel. Talk about how this is likely to
impact her, and not in a positive way.

Make absolutely sure you are not making _threats._ You need to make it clear
this will cost her and you need to do so in a way that cannot be construed by
the court system as bad faith or threatening behavior and that cannot be
construed by her as hot air or empty talk that you won't really follow through
on. This is not a scare tactic. The point is to educate this fool.

For example, it might help to get figures on what a nasty, long drawn out
divorce litigation costs in both time and money. (I knew we were saving like
$40k or more -- money we absolutely did not have -- to divorce without
lawyers. That left lots more on the table for us to split, so I didn't quibble
about small things.)

Let me also recommend that you pick up "Getting to Yes" and "The Mind and
Heart of the Negotiator". They are both research based and were both required
texts for my college class on negotiating and conflict management. The first
is a quick read. You should be able to get it through in a weekend. The second
is much meatier, but I strongly suggest you do your best to find/make time for
it as it contains lots of good info.

If you just cannot come up with the money, you may need to do all in your
power to insist she accept stocks to cover the part of the business she is
"owed."

If you can get a copy of the movie _Our House_
[https://en.wikipedia.org/wiki/Our_House_(2006_film)](https://en.wikipedia.org/wiki/Our_House_\(2006_film\))
and also _Kingdom of Heaven_ , both contain good lessons in effective hardball
negotiating.

Please get your feelings out of the way. You need to be goal-oriented here.
This is not about the fact that she is breaking your heart or doesn't love you
anymore or a thousand other personal pains involved in the end of most
marriages. Keep a journal or do therapy or something, but find a way to get
your feelings out of your way when negotiating this settlement.

This is business, not personal. There is enormous money on the table. You must
treat it like business -- and never mind that she probably won't. You need to
do all you can to avoid getting dragged into her emotional crap or provoking
her. Be diplomatic and sensitive to her hurt feelings, but do so in a way that
sidesteps the issue as much as possible. Don't pick at old wounds. Don't throw
things in her face. Stuff like that will cost you money.

This is advice rooted in having been through a divorce and managing to not
screw over either party in the process.

Best of luck.

