When a couple chooses to divorce, they must reach a fair agreement about how to divide their marital property or leave it up to the judge. While this is potentially contentious for many couples, it should greatly concern spouses who own businesses. Depending on when the spouse acquired or founded the business and any protective measures taken before the marriage, the business itself may count as marital property — meaning that both spouses have some claim to it.
If you face divorce as a business owner, you must take this issue very seriously, especially if you have employees who work for you. If you do not make saving your business a priority, it is very likely that it will not survive your divorce unscathed. It is wise to protect your rights and future with a carefully crafted divorce strategy as soon as you can.
Consider your protections
If you had the foresight to establish a prenuptial or postnuptial agreement that precludes your business from the property division process, you are in a much stronger position than otherwise. However, simply writing a prenuptial or postnuptial agreement is not enough. The document must withstand legal scrutiny. In some cases, a particularly combative spouse may attempt to challenge a prenuptial agreement, or a judge may not agree to honor all of its terms.
Similarly, if you owned the business before you married your spouse, then you may have grounds to assert that he or she cannot claim any right to it. This is not always successful, but worth considering.
Take action to protect what you have
If you hope to keep your business afloat through the divorce, you must consider all your options. If your spouse is not involved in the business, and if your personal and business finances remain separate, it is sometimes possible to argue that a business should not be divided in a property settlement. If this approach fits your needs, you must commit fully to it. Pore over your finances and make sure that your records are impeccable, and your spouse is not involved in the operations of the business in any way.
If you must consider property division, then you must know exactly what you have to divide. In many cases, this requires a professional business valuation. Once you know what the business is worth, you can properly assess what you need to sacrifice to keep it intact. You certainly don’t want your spouse to argue that he or she deserves greater compensation because neither of you knows the true value of the business.
If you have liquid assets, you can pay your spouse with these other assets to offset his or her share of the value of the business. If you do not have other assets that can cover that value, you may need to work out an ongoing payment plan to make up the difference.
However you address this issue, do not put it off. Make sure to build a strong divorce strategy as soon as you can, for your own sake and for those who depend on your business.