preparations for divorceMany happily married people will shake their head in wonder at the notion of working with their spouse, but there are many who have successfully pursued that type of partnership – and of course, there are others for whom the shared interest in a business was the final nail in the coffin of their marriage. Whether your business dealings contributed to a divorce decision or not, you still need to protect your business assets as you dissolve your marriage. Here are some important things you need to know.

Your Business May or May Not Be a Marital Asset

An important question is whether you owned your business before you got married or not. If you started your business before the marriage, then it will likely be considered individual property rather than a marital asset. If this is the case, then the question becomes whether it has the same value as it did before the marriage, and whether or not it contributed money to household income. An increase in value will be subject to equitable distribution and will not be protected unless it was specifically addressed in a separate agreement. It is also important to recognize that even in situations where a business was owned before the marriage, if your spouse contributed significantly to the business since the marriage, then the business will likely be considered marital property and will need to be divided equitably.

Protecting the Business Before A Divorce

Smart business owners take certain steps to guard against the impact of a divorce long before trouble arises. The best way to do this is to follow these steps:

  • Keep family finances separate from the business
  • Make sure that you are being paid a reasonable salary from the business rather than simply funding the family from profits
  • Do not employ your spouse in the business

Where A Business Is A Marital Asset

If the business is a marital asset and you want to protect it and keep it for yourself in the divorce, then you will likely need to provide something of equivalent value to your spouse in exchange for their share of the business. This may represent their share of a marital home, stock, or other assets. To make sure that you are treated fairly, and the business survives, get a good appraisal of the business’ value, and arrange for payments over time to prevent a cash flow problem.

If you are in the process of getting a divorce or want to take proactive steps to preserve your business in case of divorce, contact our office today to set up a time to discuss your needs.

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