When you are a business owner, divorce can prove absolutely devastating. Depending on the protections you set up to keep your business separate from your marital property, you may lose the business entirely in the property division portion of the divorce process.
Depending on where you are in the life of the business and the marriage, you may have many different protections available. In some cases, you may even have more options than you might expect. These may range from pre- and post-nuptial agreements to leveraging other assets to keep the business intact throughout the divorce.
Of course, some of these are preferable to others. If you still have time, you may be able to choose carefully which protection you prefer for your own needs. However, if you already face divorce, you may have more difficulty.
Don’t wait to seek out the guidance you need to protect your business, whether you are getting married soon, or are already in the middle of a divorce. An experienced attorney can help you understand the options you have available while protecting your rights.
Prenuptial agreements are ideal
The strongest protection against divorce for a business or any other property is through a carefully crafted prenuptial agreement. Prenuptial agreements allow a person to define the property they wish to keep separate from marital property.
This way, if a divorce occurs, you and your spouse can work out a fair division of property that does include your business. Even if you’re already married, you may have success asking your spouse to sign a post-nuptial agreement identifying your business as personal property, not marital property. While prenuptial agreements are generally stronger than post-nuptial agreements, post-nuptial agreements are better than none at all.
Demonstrate that the business is not marital property
Even without a prenuptial or post-nuptial agreement, you may have a way to claim that the business is not marital property. If, for instance, you took ownership of the business before you entered the marriage, or if you keep your married life and business separate enough, you may find this claim successful.
In order for this strategy to succeed, you must demonstrate that your spouse did not contribute to the success of the business or have a significant role in its conception or operation. If your spouse is involved in any way with the business, you must remove him or her from the position. In some cases, this may even mean that you have to fire your spouse.
When it comes to your financial records, you must demonstrate the independence of your business from your personal finances. You should pay yourself fairly so that your spouse cannot claim that you left money in the business that should have come back home.
Also be mindful of spending money from your personal accounts on your business, and vice versa. You should keep these as distinctly different as possible. In some cases, this strategy may prove successful and allow you to remove your business from property division.
Negotiating to keep the business
In some cases, you must keep your business within the scope of marital property. However, this does not mean the ship is sunk necessarily. You may prevail if you can offer your spouse other assets to offset the value he or she deserves from the business.
While these are not the only ways to save a business from divorce, they are some of the most common. Whatever protections or strategies you believe may fit your needs, you should consider consulting with an attorney. An experienced attorney may understand additional protections you can use.