When divorce comes knocking, you and your family might not be the only ones whose lives change drastically. For business owners, the prospect of divorce can be even heavier than for other spouses, because the law generally considers a business to be marital property.
Plainly speaking, this means that your employees and clients may also suffer if your spouse puts your business on the chopping block when it comes time to negotiate your divorce settlement.
One of the best ways to prevent this kind of difficult situation is through a prenuptial agreement. However, if you did not create such an agreement, there are still actions you can take to keep the business intact.
The truth is, attempting to keep a business from breaking apart in your divorce is not easy, and there are no guarantees. However, with some strong, decisive action and the guidance of an experienced attorney who can help you navigate this tricky area, saving your business can be possible — but you need to be proactive.
You must act quickly for the sake of the business
In order to hope to save your business, you must decide that it is a priority over other assets that your divorce negotiation may divvy up. This is not easy, but it is wise.
As soon as you see divorce as a possibility, you should consider approaching your spouse with a postnuptial agreement that protects your business while compensating them fairly. While creating such an agreement at this stage is not necessarily preferable to a prenuptial agreement, it is still a good option if both parties are on board.
Even if you cannot secure the postnuptial agreement, you still have some options:
Begin by keeping the best records that you can, and keeping your family finances as separate as possible from the business finances. This means you shouldn’t spend company money on things for the family, and you shouldn’t spend your personal money on the business – such as borrowing against your home for it.
It is also important to pay yourself appropriately to your industry. If the average business owner in your line of work with comparable success brings home $250,000 yearly, and you only bring home $150,000 per year to leave more money in the business, you create vulnerability in your divorce negotiation. Your spouse can claim that you have withheld money that should rightly go to the family.
Also, you should completely remove your spouse from any and all business involvement. If your spouse currently works in the company in some capacity, you may need to fire them. If they continue their involvement in the company, you will face added difficulty in keeping it intact. The greater their involvement, the greater their legitimate claim to the business as a marital asset.
Know what you have and what to sacrifice
Protecting your business is very difficult if you do not know its actual worth. It is wise to have your business professionally valued. This way, your spouse cannot claim that it is worth more than it actually is.
Once you know the value of the business, you’ll have a broad idea of what you need to sacrifice in order to keep it. This might mean that you offer your spouse other assets in the settlement – such as the family home, vehicles, other real estate, investments or savings.
Don’t approach this battle alone
It is never easy to try to save a business in a divorce. However, you do not have to – and should not – go through this alone. With proper legal guidance from an experienced attorney, you can rest assured that your business’s future is in the best possible hands – with all necessary factors taken into account.
