Divorce comes in many forms, some more complicated than others. For couples without children and with few assets or liabilities to divide, the process is often straightforward and simple. However, when one spouse owns a business, a divorce becomes more complex. If you own a business and suspect that divorce is in your future, now is the time to take steps to protect the business and build your divorce strategy.
Approaching divorce with a clear understanding of your priorities helps relieve a great deal of confusion and anxiety. Once you choose your priorities, a strong strategy helps protect your personal rights, allowing you to focus on the future during this difficult season.
Does your spouse have ownership?
The law treats businesses similarly to other forms of property, such as real estate. When spouses choose to divorce, they must divide their marital property, which may include a business. Not all businesses qualify as marital property, depending on whether both spouses contribute to the business and whether a prenuptial agreement protects the business.
If you have a prenuptial agreement that separates your business apart from your marital property, then it is wise to review the agreement to make sure that it will stand up to legal scrutiny in court. If you do not have a prenuptial agreement protecting your business, you may have to include the business in the divorce negotiations.
In some cases, it is possible to claim that a business is not marital property. To make this claim, the owning spouse must show that the non-owning spouse did not contribute to the operation of the business and that personal finances and business finances remain separate.
If you hope to keep your business separate from your divorce, you may need to make some significant sacrifices elsewhere.
Settling an ownership dispute
If your spouse believes that they deserve a portion of the business’s value as a part of your divorce, this does not mean that you must sell the business and close the doors. However, depending on the value of the business and the strength of your spouse’s claim, you may need to offer them other assets to offset the value they own.
If you do not have other assets to offer in exchange, it is possible to work out a structured payment plan that compensates your spouse over time. This allows you to continue moving forward with the business after divorce, while meeting your spouse’s claim on the business’s value.
Weathering divorce is difficult in any circumstance, but business owners often face difficulties that other divorcing spouses may never consider. Be sure to protect yourself with a strong legal strategy that keeps your rights and priorities secure while you work through this difficult season and prepare for the next.