Tory Burch and ex-husband in legal battles over their profitable business
In less than a decade, Tory Burch has become one of the most recognizable names in fashion, with the signature “double T” logo adorning shoes and handbags coveted across the country. The company is now incredibly successful, with estimated sales of approximately $800 million last year. The brand shows no signs of slowing down, as around 35 store openings are expected during 2013 in the U.S. and across the globe. As an estimated 80 percent of sales are currently generated in the United States, international expansion could lead to even greater sales projections in coming years.
Despite the burgeoning success of the company, many outside of the New York social scene are unaware of the issues within the company between Tory Burch and her ex-husband, Chris. The brand was launched while the couple was married. Although there are now disputes as to where the startup capital came from, both sides agree Chris put some money into the business venture – he claims he was responsible for the entire $2 million that launched the business, the company disagrees with that assertion.
In 2006, Tory started divorce proceedings, which culminated approximately two years later. The couple had not signed a prenuptial agreement and Chris maintained shares in the company and a position on the board. Since the divorce of these two business owners, Chris has launched a new brand, called C. Wonder, with a new girlfriend.
While Chris denies “any correlation” between the Tory Burch brand and that of C. Wonder, many – including the Tory Burch company – have remarked on certain similarities between the two companies, including the logo and some of the products. C. Wonder products retail at lower prices than Tory Burch, making some speculate that this new brand has prevented Tory Burch from releasing a so-called diffusion line. Diffusion lines are products released by exclusive designers for more affordable prices.
As tensions grew, Chris sued his ex-wife late last year, claiming breach of contract. In addition to compensatory damages, he is also seeking the removal of Tory and four others from the board of directors.
While this is just one high profile example of a business venture between husband and wife gone wrong, similar situations are commonplace across the country.
Factors to consider when a divorcing couple owns a business
According to estimates from the Census Bureau, in 2007 there were approximately 3.7 million businesses jointly owned by spouses in the United States. As the divorce rate is still high in the U.S. – over 50 percent of first marriages and around 70 percent of subsequent marriages end in divorce – it stands to reason that a significant number of those spouses will have to reach an agreement about the future of their business following a divorce.
While the Burch’s did not have a prenuptial agreement in place, it is typically wise for spouses to delineate how the business will be divided before divorce is considered. Even if the business is established following the marriage, couples can enter into postnuptial agreements to outline their expectations should the marriage not succeed.
If the business is owned by one spouse, it is important for both to be aware of the rules regarding division of property in their state. For instance, marital property in Utah is divided equitably, which means the property will be divided fairly, depending on factors such as the length of the marriage.
When the business employs a variety of workers, experts also suggest that the couple should explain the situation to employees directly. Discussing the plan for the future of the business will typically ease employees’ fears about the stability of their positions.
The issues involved in the divorce of business owners can be complex. If you are in such a situation, it is wise to consult with a skilled Utah family law attorney to ensure your rights are protected.