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What happens to successful companies when their founders divorce

Bad things can happen to companies when their partners break up
Irreconcilable differences.
  • Oliver Staley
By Oliver Staley

Business & culture editor

Published Last updated This article is more than 2 years old.

Sometimes even the most successful work partnerships can unravel. Smart founders plan for that contingency, though it can get complicated for couples or even just good friends who go into business together. In those cases, discussing buyout clauses can be as uncomfortable as negotiating a pre-nup.

But anyone doubting the wisdom of taking such steps should consider the slow-moving train wreck that’s unfolding in Delaware, where a couple’s lack of foresight may doom TransPerfect, an otherwise thriving translation-software business with 3,500 employees.

Transperfect was founded by Elizabeth Elting and Philip Shawe, who met at New York University and later became engaged in the mid-1990s, but never married, according to the New York Times (paywall). The company outlasted their romance, but they never drew up an agreement that spelled out how one of them could exit the company if the relationship soured.

And sour it did. The pair squabbled over basic business decisions, and  management became dysfunctional. The founders went to court in Delaware, where TransPerfect is incorporated, and where the law allowed a judge to order the sale of TransPerfect because the owners are deadlocked.  The state legislature has now taken up the case, due to concerns about private property rights and the fate of its employees if the business is sold to a private-equity firm.

In Louisiana, something similar happened to a less high-profile company. Theresa Dupuy founded FuzziBunz, an online diaper business, and lost it to her ex-husband when a divorce court split up the couple’s property, according to Entrepreneur magazine. She only regained the business by buying it back.

When founders are married, there are specific steps they can take to shield the company from divorce proceedings, such as easing one spouse out of management, and making sure business and household expenses don’t become intermingled. But whether founders are married, engaged, or just college buddies with a shared dream, an agreement for unwinding the partnership is essential. It’s a difficult conversation that could prevent many worse ones in the future.

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