Owning a business is a complicated experience, in good times and in difficult times, but when a business owner faces a divorce, they must prepare carefully to protect themselves and their business. Without a strong legal strategy, divorce may impact the business significantly, and may even close its doors.
If you are a business owner and believe that divorce is in your future, now is the time to begin identifying your priorities and building a strategy to protect them. Divorce is rarely simple, even in ideal circumstances, and it is important to use the legal tools that you have to keep your rights secure throughout the process.
Is the business protected?
In recent years, many more couples began using prenuptial agreements to protect themselves and each other. If you and your spouse created a prenuptial agreement, then it is wise to look through the agreement for any terms that may protect your business or that involve the business in some way. If the agreement includes protections, be sure that you understand the conditions of the agreement and review it for accuracy. If your agreement does not hold up to legal scrutiny, it may cause more problems than it solves.
Does your spouse have a valid claim to the business?
Many people do not realize that the law views businesses as property that a person may own, like they own a car or a house. In divorce, this means that a business may qualify as marital property if one spouse holds full or partial ownership. You may be able to keep your business separate from your divorce if you can demonstrate that they have little or no involvement in the business and that your business finances and personal household finances do not commingle.
This is sometimes effective for business owners whose spouses do not interact with the business in any meaningful way. However, if your spouse does interact with the business in some way, they may have a valid claim to a portion of your owned value in the business.
Negotiating the value of a business can grow into one of the most contentious aspects of divorce. In these circumstances, it is wise to consider an independent business valuation. The valuation accounts for the business’s assets and liabilities, and much more, allowing both spouses to negotiate fairly from a common understanding.
If you hope to keep your business together through the divorce, then you may need to compensate your spouse for their claim to the business’s value. You may have other sufficient assets that you can use to compensate your spouse, or you may need to consider other payment options over time.
Don’t wait to protect your business and your future
As you gather your priorities and build your divorce strategy, it is important to understand the legal issues at hand and the tools that you have available. A strong divorce strategy helps ensure that your rights remain secure and identifies potential conflicts before they arise, allowing you to focus on moving through this difficult chapter and onto the next with confidence.