Ask HN: What happens when a founder gets divorced?

[callmeed]

This is something I've been curious about for quite a while (I have no plans to get divorced BTW).

Assuming there's no pre-nup, what happens when a startup founder gets divorced? I'm guessing things vary state-by-state, but I'm curious if anyone has knowledge or experience in this arena.

Has it ever affected a high-profile/silicon valley startup?

Thanks.

[gexla]

Perhaps you are asking the wrong question. A more effective question is "what happens to a business when one of the owners gets divorced?" I have no knowledge of this area, but I'm sure there is a ton of info on the internet.

I'm sure the answer largely depends on your business structure. For example, a corporation is a separate entity from your personal finances and there are really no owners, just shareholders. So in this case your wife may only be able to take shares.

If you don't have a corporation or haven't created any other the other business structure then any money you make is dealt with by a schedule C which makes you a sole proprietor. This money goes into the "marriage pot" and your wife would be able to hit this the same as the rest of your finances.

Best advice, talk to a lawyer and an accountant. ;)

[p_h]

The ex gets access half of the founder's equity, but a good incorporation (or shareholder's?) contract will allow the other partners to buy out the wife's shares before she can actually become a "partner" in the company.

[paulsingh]

I'm no lawyer so, certainly take this with a grain of salt:

When Fenwick put my incorporation paperwork together, I recall there being some sort of doc that assigned my equity to my wife in the event that I died or became otherwise incapacitated.

I would think that a divorce might result in ex-wife trying to get some of that equity but it may ultimately depend on your incorporation's policy and/or Board approval.