6 ways to protect your business in your divorce

On Behalf of | Dec 19, 2023 | Divorce |

Your business is probably your largest asset. This makes it a focal point when you get divorced. If your marriage is headed towards dissolution, then, you need to be prepared for your spouse to try to obtain as much of a stake in your business as possible.

This can be scary, of course, given that it can have tremendous implications for your business. Your spouse might end up having a say in business operations, or your company might end up having to dissolve to accommodate the loss. With so much on the line, you need to know how to protect your business and, in turn, your financial health.

How can you protect your business during divorce?

First, it’s important to realize that there’s a lot that you can do on the front end to keep your business safe, so it’s never too early to start working to protect your business. It’s also never too late. If you want to protect your business as fully as possible, you should consider the following options:

  1. Creating a prenuptial agreement: This agreement, which is contractual in nature, specifies the financial obligations of each party and how marital assets will be divided if there’s a divorce. When it comes to a business, though, you can also specify that it and its assets are individually held, thereby removing them from the property division process in the event of divorce.
  2. Utilizing a buy-sell agreement: This contract specifies how an owner’s portion of the business will be dispensed with when they leave. This document can even address situations where divorce occurs, which can keep the business safe while protecting your financial interests.
  3. Limit your spouse’s participation in the business: If your spouse is involved in your business, such as by working for you or making important decisions, then they’re going to have an interest in it when divorce arises. By limiting your spouse’s involvement, you shield your business from your spouse’s reach.
  4. Pay yourself: Reinvesting the income you generate back into the business is going to open the door for your spouse to argue that they should gain access to a larger portion of the business’s assets given that marital funds were used to build the business. By drawing a salary, on the other hand, you limit your business’s exposure.
  5. Avoid commingling: Mixing your business assets with your personal assets is going to convert your business funds into community property, even if they were deemed individually held assets to begin with. This, of course, means that your spouse is going to be able to get their hands on more of your business assets than you want.
  6. Enter into a postnuptial agreement: Even if you didn’t negotiate and create a prenuptial agreement, you can still negotiate a postnuptial agreement. The goal here is the same as a prenuptial agreement, you simply enter into the contractual arrangement at some point after you’re married.

Know how to protect your financial interests in your divorce

The outcome of your divorce can have tremendous financial implications. Your hard-earned wealth can be swiped away from you if you’re not careful, which is why meticulous planning is key before heading into your divorce.

If you have a lot of assets, then figuring out the best way to navigate your divorce can feel overwhelming. But you don’t have to be daunted by the process. You just need to give yourself time and resources to be able to develop the strategy that’s right for you. With that in mind, we encourage you to take those first steps now so that you’re steadily making progress towards the outcome that you want.


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