Protect Your Business in a Divorce

Posted in : wake county divorce lawyer

If you're a business owner facing divorce, the idea of protecting your company from divorce are only able to increase the stress and strain that you are already going through. Unlike most home or personal belongings, your business represents an individual investment of your own time, money, creativity and hard work. The idea that you might lose something you built because of an unfortunate submit your personal circumstances can be both frustrating and frightening.

There are some things you ought to keep in mind, both w hen dealing with divorce, as well as before divorce even seems a prospect to you. If you never get divorced, that's great, congratulations. But by taking time to ensure that your business is protected you can prevent many headaches, including every entrepreneur's ultimate nightmare: losing your business.

Here are a few things you should think about that might help keep the business intact and functioning:
Obtain a prenuptial agreement. Sure, it's not very romantic to contemplate divorce even before you marry, but if you own a business it's your responsibility to think about the chance. Speak openly and honestly with your intended regarding your desire to keep your business separate from the wedding, and craft an agreement that is fair and prudent for both parties before you have need to be contentious.

Insert provisions into your business agreements to maintain your spouse out of the business. This sounds cold-hearted perhaps, but if you have been in a partnership or company you owe it to yourself, your partners, the employees and your investors to protect the company. You should already have a buy-sell agreement with any partners. This will typically state what should happen to the business should any owner's status change, will outline any pre-set price agreements for sale of the business, and may contain language that limits your spouse's involvement in the industry. The buy-sell agreement, although it doesn't protect you entirely from the events that may exist in a divorce, provides a contractual framework and legal foundation for any future court rulings concerning the business.

Keep your family assets separate from your business assets. Case common business sense, but it's even more important in the event of a divorce. If you are using family money to fund your company, you are developing a situation where your spouse might have claim to a number of your company's equity.

Pay yourself. Similarly, if you are not taking a salary, or taking a salary that is less than the going rate for your line of work, your spouse can declare that you have taken assets that rightfully belonged for your family and set them to your business. In the eyes from the court, this might substantiate your spouse's claim to a stake in your business.

Don't involve your spouse in your business. Again, this sounds cold, but you will find sound business reasons for keeping your spouse's involvement inside your business to a minimum. If you hire your spouse, it is prudent to terminate that relationship as soon as possible if you end up in a divorce. The greater the involvement of your spouse in your business, the greater the claim your partner can make to a stake in that business.
Produce a Property Settlement Note. This particular will outline ahead of time how your spouse will be paid out for their share in your business, should your marriage be dissolved.
Place your business and it is assets inside a trust. This will protect the assets from divorce, because you will no longer technically own them. The trust becomes, in effect, who owns the company, and never only its current assets but also its future growth will remain outside the parameters of your marital assets.

Trade your share of the marital assets for equity in your business. This is only relevant if you are already going through a divorce, but it can help keep your business intact. You can maintain your share in the company by trading off other assets that are less important to you.

Sell equity in your business to raise capital to keep it running. No ideal solution, but if you can convince investors to buy shares of your company, you might be able to pay off your spouse while keeping your business functions.

Split the business. This is the least desirable course of action, as it either means that you will have to continue your relationship with your ex in a business context-which isn't comfortable-or, worse, that you will have to sell your business and divide the assets.