Even if your impending divorce is amicable, it will considerably impact your finances and your business, as your spouse will have a claim to everything in your name. Illinois is an equitable distribution state, so keep that in mind when determining how to split assets from your company in a divorce settlement.
How can I protect my business?
Several scenarios can manifest themselves in a possible divorce settlement. Your ex-spouse could become an unwanted partner if the settlement includes a substantial stake in the business. If they helped run the business, the situation could become even more complicated, especially if they want to remain involved.
Business owners might avoid these situations through several planning strategies that include:
- Drafting and signing a pre-or post-nuptial agreement
- Separating personal and business finances
- Paying yourself a fair salary
- Putting the business into a trust
- Buying a whole life insurance policy to have enough money for a possible divorce settlement
Each of these scenarios requires some forethought before you enter into marriage. In some cases, you can still protect your business when the marriage is sound by taking these steps. However, not everyone does so. Is it ever too late to protect your businesses from divorce?
Get creative if you don’t have safeguards in place
When business owners divorce, most want to avoid having to sell the company to pay for the divorce settlement. To do so, you may have to explore some creative solutions to protect your business’s assets if you haven’t put one of the previously mentioned safeguards in place. One way to do so is to sell other assets or only a part of your business so you can retain control of your company. Another solution is to make payments to your ex-spouse over time.
When divorcing, you must reach an equitable agreement with your spouse. Evaluate all your options and don’t jump at the first proposal on the table; it could potentially hurt you in the long run. By taking your time and evaluating possible solutions, you will more likely be able to protect your business.