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Protect your business as you enter into divorce

On Behalf of | Jul 22, 2019 | Uncategorized

If you have a company and a divorce may be on the horizon, it’s time to look into how you can divorce-proof your company. You put in the time and effort needed to open a business, and the fact that you’re going through a divorce shouldn’t mean that your business is put in jeopardy. Sadly, if you’re not prepared, a divorce can mean the end of a business or significant losses.

To begin with, you should understand that without any protection, businesses might need to be sold or liquidated to bring in cash for the divorce. Your spouse might be entitled to part of the business, too, and want to remain invested. There are numerous scenarios in which the business no longer solely belongs to you, and there are even cases where you might lose the business to your ex-spouse.

How can you protect your business during a divorce?

The first thing to do is to keep the business’s finances separate from your family finances.This will limit how much of the business crosses over as marital property, particularly if you had this business before you were married.

Another good idea is to get your spouse out of the daily work related to the business. In the court’s eyes, the longer a person has been working in the business, the more likely it is that the court will allow that to continue. You may find it helpful to ease your spouse out of the company over time, so if you are considering divorce, do this sooner rather than later.

While California is a community property state, that doesn’t mean that you have to divide all assets 50-50. You just need to divide the overall value of your marital property in half. To protect your business from being split, consider paying your spouse through other assets. Give up a home, forfeit vehicles or release other assets, so that you can remain the sole owner of your business.

If you have not yet married or you are married but not considering divorce, you may want to turn to a prenuptial or postnuptial agreement to address the company’s future. However, once you’ve started the divorce process, you won’t be able to set these up. If there is any risk of divorce (and there always is), you should have an agreement in place for your business’s sake.

These are a few ideas on how to protect your business during divorce. It can mean giving up other assets, but it may be worth the effort if you can retain 100% control over your investment.