When a person who owns a business faces divorce, the end of his or her marriage may also threaten the business itself, and many people who depend on the business. In most cases, the easiest and most effective way to prevent these potentially disastrous consequences is to protect the business using a prenuptial agreement, but many business owners do not have the foresight to do so, leaving the success of the business potentially dependent on the success of the marriage.
If you find yourself scrambling for ways to protect the business you own from the effects of your failing marriage, it is important to determine your priorities and then act as quickly and decisively as you can. You may have more protective options than you realize, and an experienced divorce attorney who understands complex assets can help you assess the threats your divorce poses to your business and the legal options available to protect it.
Is your business marital property?
Despite the fact that businesses often involve the needs and income of many different parties, the law still treats them like any other type of property a person can own. If you own a business, your spouse may have a legitimate claim to a portion of its value.
However, this is not always the case. Before you make saving the business your top priority in the divorce, be sure to consult with a legal professional to determine if your business counts as marital property. In some cases, if your divorce is relatively amicable, or if you see the writing on the wall well in advance and can think clearly about the matter, your spouse may willingly sign an agreement to leave the business out of the divorce.
Is saving the business your priority?
If it is not clear whether your business qualifies as marital property, you should do everything you can to keep it separate from your personal life and personal finances.
Does your spouse work in the business in some capacity? It is wise to remove him or her immediately. The greater your spouse’s involvement in the business, the more legitimate his or her claims to it may prove in court.
Do you use any personal assets to fund the business, or mingle your personal and business assets? You should address this conflict as soon as you can. Similarly, if your take home pay from the business is below those of other comparable owners, your spouse may claim you are unfairly withholding personal income to save it for yourself later. Be sure to pay yourself a fair salary to minimize the risk of the conflict.
Can you offer your spouse other assets?
If you cannot mitigate your spouse’s claim to the business, you may still have options to keep it intact. One commonly successful strategy is to assess the value of the business using a professional business valuation and then offer your spouse other assets in exchange for keeping the business off the table.
However you choose to proceed, do so prudently and decisively. Professional legal counsel can help you identify strong strategies to set the tone for your divorce and keep the negotiations fair as you work through this tough personal season and look to brighter skies on the other side.
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At Alward Fisher, we provide more than savvy legal representation. We provide peace of mind. Peace of mind for your business. Peace of mind for your family. And the peace of mind for your future. No matter what types of legal challenges you are facing, we can help you find solutions.