How to protect your business in a divorce

On Behalf of | Jan 25, 2020 | Firm News |

Money is a central question in any divorce. Who gets the house? How are the marital assets divided? 

The stakes are even higher – and more complex – when either spouse owns a business. It is likely your spouse was a supporter of your business as an active participant or behind the scenes. How do you shield your investment? 

You can protect your business with a contract 

Think of your marriage as an extension of your business. This may seem cold. Yet it is vital to protect your investment and financial future with a formal contract. 

Consider drawing up either a prenuptial or postnuptial agreement that establishes clear rules. The agreement can: 

  • Establish the business as your property that is not open to division 
  • Set guidelines for one spouse buying out the other 
  • Limit your spouse’s share to how much the value of the business increased during your marriage 

You can protect your business without a contract 

Document yourself as the sole owner of the business. Make your business off-limits to transfer during your divorce. 

Avoid costly questions with thorough record keeping about business finances. Your records should identify the use of premarital or marital funds as capital. Have separate accounts for business and personal use. Maintain records of all cash transactions. 

Pay yourself a fair rate as the business owner. Also pay a fair rate to your spouse if he or she works at the business. Failure to do either can look like you were taking advantage of your position. 

Protecting your business means protecting yourself 

While divorce is a difficult time for everyone, you want to make sure that you land on your feet. Take the proper steps, so the same is true for your business. 

Emotions are running high during divorce negotiations. Yet it is possible to reach a financial agreement that is beneficial to both parties. The key is planning – like any business deal.