If you are a business owner, protecting your business and its success is very important to you. While there are many things that can threaten the success of your business, going through a divorce can bring on a lot of stress and uncertainty. The question of who will own the business and how your divorce will impact the operations of the business are a major concern. Having a good attorney can help safeguard your business during a divorce.
The biggest legal implication on your business when you are going through a divorce is whether or not it is marital property. If one spouse owned a business before marriage, that business may be considered separate property and see no impact from the divorce settlement. However, if the business was started and grew substantially during the marriage, it will be considered marital property, and all marital property is subject to division during the divorce process. This may include the business being sold and the proceeds split, one spouse buying out the other, or both spouse’s maintaining a degree of ownership. All of these outcomes can have a significant influence on the success of the business.
One of the most important things you can do is have a well-crafted prenuptial or postnuptial agreement in place that specifically protects the business. The agreement should specify exactly how the business will be valued, divided, or what other provisions will be in place in the case of divorce.
When the business was owned by one spouse prior to marriage, this is an essential step. If the business was created by one or both spouses during the marriage, it is still important to outline all the potential legal possibilities, including the prospect of divorce, and get those in writing before an issue arises so there is a roadmap in place in case of divorce, death, or any other complication.
Business continuation planning is a very smart way to ensure that the business will be able to function, even if ownership becomes an issue. A buy-sell agreement can help prevent a spouse from selling their share in the business to a third party, or from becoming an unwilling co-owner.
The other important thing to do to safeguard your business is to keep all business and personal accounts separate. This is a smart idea for your business no matter what, as it will keep your financial picture clear, but in the case of divorce, it will make valuing and protecting the business as a separate entity much easier. If your business relies on intellectual property, such as a patent or trademark, this could be viewed as a marital asset during divorce, and your attorney can make sure that you have the proper protection in place so the IP is owned by the business.
Many of the strategies for safeguarding your business involve putting protection in place before divorce is on the table. If you are facing a divorce as a business owner and feel unprepared, it doesn’t mean that you are doomed to lose your business, it simply means that you and your attorney will need to work to make sure that you can agree on a settlement that protects the business.
The first step is to have your business valuation done by a valuation professional. There are several methods of business valuation, and the end goal is to have an impartial party provide an appropriate value that will be considered in your asset division. Many business owners protect their business by arranging a buyout of their spouse’s interest or share of the company. Sometimes this can be done as a lump sum payment, sometimes as a payment plan over time, and sometimes as an exchange for another asset of similar value, such as a residence.
If you have invested in your business and want to make sure that it remains not only intact, but thriving after your divorce, you need an attorney who can advise you on the best strategy during your divorce process. An experienced and knowledgeable high-asset divorce attorney will be able to help you get the proper business valuation, as well as help you to explore alternative asset division options that will allow you to maintain your business without requiring the business to be sold or liquidated. If you are a business owner facing divorce, no matter what prior arrangements you have in place, look for an attorney who has had experience with clients in a similar situation to yours. The right divorce attorney will have a proven track record of successful outcomes for business owners who have gone through a divorce. Your attorney should also have a strong professional network of other experts to help you through the process, such as business valuators, financial professionals, and tax experts to recommend.
If you are going through a divorce as a business owner, you need a good attorney who will help you look out for the good of your business as well as your personal outcome, no matter what safeguards you may have put in place. They can help you look at all the potential outcomes to determine the best strategy for negotiating with your spouse and will have a team of experts to protect what you have worked so hard for. If you’re filing for divorce and own a business, contact my office right away for the next best step you can take to protect your business and your future.