Attorney
If you co-own a business or professional practice in the Albuquerque area, you almost certainly have a buy-sell agreement in place. These documents are the legal foundation of your partnership because they say what happens to each owner’s interest when a major life event forces a change in ownership.
Events like death, retirement, or burning desire to move in a different direction get planned for because they feel inevitable, or at least foreseeable. Divorce, on the other hand, is often ignored. And that oversight can create serious problems.
Divorce doesn’t make an existing buy-sell agreement irrelevant, but it does introduce legal, financial, and relational dimensions that the agreement alone can’t resolve. The good news is working with the right legal counsel, someone like Attorney Bob Matteucci, who understands both family law and the financial architecture of closely held business, can protect what you’ve built.
Buy-Sell Agreements and the Three D’s
At their core, buy-sell agreements exist to prevent the wrong people from ending up with a stake in your business. They give other owners the right, and sometimes the obligation, to purchase an outgoing owner’s interest at a defined price, under defined terms, rather than letting that interest end up in the hands of an outsider.
The triggering events these agreements typically address fall into a few predictable categories. The three D’s: Death, Disability, and Voluntary Departure
Death and Disability — When this sort of triggering event occurs, it’s sudden and obvious, so there is no debate about what should happen next because it is spelled out in the buy-sell agreement. The valuation method was chosen, the timeline negotiated, and the funding provided by life insurance or disability insurance.
Voluntary Departure — The buy-sell agreement may also be triggered when a co-owner decides to leave the business. The departing owner may be retiring, pursuing another opportunity, or simply ready to move on, it doesn’t matter why they are leaving as long as their goodbye is consensual. A well-drafted buy-sell agreement creates a clear exit lane by specifying a valuation method, a timeline for completing the purchase, and how the buyout will be funded.
Ideally, an agreement will also address a fourth D, divorce. Divorce is a common reason partners need to exit a business relationship.
Why Divorce Is Different. And Harder.
Thanks to New Mexico’s community property law, which presumes all assets that are purchased during a marriage, or that increase in value during a marriage, are jointly owned, divorce often means business owners must readjust their holdings.
Basically, an Albuquerque company owned by two business partners should more realistically be described as having four owners — the business partners, and each business partner’s spouse. When one of those marriages ends, the exiting spouse walks away with half of the value of their joint interest in the business.
The problem here is that even if the partners planned for this possibility, it can be unpredictable and it is often involuntary. Even in an amicable split, there is usually debate about the value of the business and how the spouse’s buyout will be funded.
What Can Be Done: Protecting the Business Before and During Divorce
Ideally, the buy-sell agreement will have a provision addressing divorce. Whether it does or does not, the big issues are valuation and financing.
Valuation — Buy-sell agreements typically specify a valuation method — book value, a fixed formula, or a professional appraisal. A spouse who believes the business is worth more than the agreed-upon formula suggests will want an independent business valuation. The other spouse’s attorney will almost certainly request one too. If the agreed method produces a number that looks unfavorable to one side, expect it to be challenged.
Bob’s business background means he can assess each method critically, and identify where a valuation may be overstating or understating the business’s actual worth.
Financing — Most buy-sell agreements are structured as either a cross-purchase agreement (co-owners buy the departing owner’s interest directly) or a redemption agreement (the business entity buys back the interest). In practice, many use a hybrid of both. But when divorce is the trigger, the main concern is not actually shifting ownership interests, its preservation. In many cases, the non-owner spouse receives their share of the business’s value in the form of other assets (like the family home or a retirement account), a structured payout, or a negotiated buyout, without ever actually receiving an ownership stake. This keeps the partnership intact and the business running.
Collaborative divorce, which Bob is certified to handle, is particularly well-suited to these negotiations because both spouses are working toward a resolution, not against each other.
Serving Families with Dignity & Compassion
Buy-sell agreements are powerful and important legal documents. But they are written with predictable business events, not marital disputes in mind. However, with the right legal and financial guidance, most business owners navigate divorce without disrupting operations.
If you’re a business owner facing divorce in Albuquerque, or a professional concerned about what happens to your practice when your partner’s marriage implodes, Bob Matteucci can help you think through your options. Contact him today to set up a meeting.