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How to Protect Your Business in a Divorce

How to Protect Your Business in a Divorce

When you get divorced, assets and debts accrued during the marriage will be valued and divided equitably between you and your spouse. However, there are several proactive steps that you can take to protect your business assets before and after you start the divorce process. 

 

If You Own a Business, Get a Pre or Postnup

 

Prenuptial and postnuptial agreements are agreements between spouses that dictate how to divide marital interests if they divorce. However, a prenuptial agreement does not doom your marriage from the start; it’s wise to guarantee sole ownership of your business regardless of what life throws your way. 

 

If you and your spouse divorce and a pre or postnuptial agreement exists, the contract terms will take effect. Therefore, business owners should strongly consider creating a prenuptial agreement or postnuptial agreement that protects their business from asset division during divorce. 

 

Keep Your Marriage and Business Separate

 

If no pre or postnup exists, the nature of your day-to-day business accounting may help shield your business during divorce. Keeping marital and business accounts separate will reduce the likelihood of your business being considered a marital asset in the divorce. 

 

Avoid using business money to pay for marital expenses and vice versa. You may create a trust, LLC, or corporation to own and manage your assets to ensure that business and marital expenses do not blend. 

 

Marital partnerships can be fertile ground for successful professional partnerships. Unfortunately, when one sours, there can be complicated implications for the other. Employment at your spouse’s business increases the likelihood that the court will decide that business assets should be split between spouses in the divorce. Separating your spouse from your business could minimize the risk to your business in a divorce. 

 

Protecting Your Business Is the Priority

 

You also have the option to request sole ownership of the business in exchange for equitable, reduced ownership of other assets. For example, you could retain sole ownership of the business in exchange for your share of equitable real estate ownership. If protecting your business interests is a priority in the divorce, your attorney may advise you to concede less consequential terms in favor of retaining business ownership.

 

The equitable distribution process theoretically splits your marital property straight down the middle in a divorce, which could jeopardize your business. However, an experienced divorce attorney will consider your relationship’s unique circumstances and negotiate fiercely to protect your business interests during your divorce.