How to Protect your Business in a Divorce
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Transcript of How to Protect your Business in a Divorce
How to Protect Your Business in a Divorce
Get a prenuptial agreement. Sure, it’s not very romantic to contemplate divorce before you even marry, but if you own a business it’s your responsibility to think about the possibility. Speak openly and honestly with your intended about your desire to keep your business separate from the marriage, and craft an agreement that is fair and prudent for both parties before you have any reason to be contentious.
Insert provisions into
agreements to keep
your spouse out of the
Keep your family assets separate from your business assets. This is just common business sense, but it’s even more important in the event of a divorce. If you are using family money to fund your business, you are creating a situation where your spouse may have claim to some of your company’s equity.
Pay yourself. Similarly, if you are not taking a salary, or taking a salary that is less than the going rate for your line of work, your spouse can claim that you have taken assets that rightfully belonged to your family and put them into your business.
Don’t involve your spouse in your business. Again, this sounds cold, but there are sound business reasons for keeping your spouse’s involvement in your business to a minimum.
Create a Property Settlement Note. This will outline in advance how your spouse is to be paid out for their share in your business, should your marriage be dissolved.
Put your business and its assets in a trust. This will protect the assets from divorce, as you will no longer technically own them. The trust becomes, in effect, the owner of the business, and not only its current assets but also its future growth will remain outside the parameters of your marital assets.
Trade your share of the marital assets for equity in your business. This is only relevant if you are already going through a divorce, but it can help keep your business intact. You can maintain your share in the business by trading off other assets that are less important to you.
Sell equity in your business to raise capital to keep it running. Not an ideal solution, but if you can convince investors to buy shares of your company, you may be able to pay off your spouse while maintaining your business functions.
Split the business. This is the least desirable course of action, as it either means that you will have to continue your relationship with your ex in a business context.
If you are a business owner concerned about protecting your business—either proactively, or in the event of a divorce or other life-changing event—call us for a free consultation at 856-227-7888 or contact us at [email protected].