Protecting Your Business During a Divorce

No one gets married with the expectation of divorce, but it has become a reality for many couples. While divorces are always hard on everyone involved, it can become exponentially more difficult when one or both spouses own a business. The division of property will include the business, including its assets and revenue up until the separation. Most divorced couples will not want to remain business partners following their separation, so how do you protect your business during a divorce?
Protecting Your Business During a Divorce: Did You Sign a Prenuptual Agreement?

Most people consider “prenup’s” to be cold and heartless, but they are a responsible way to protect your future. If you and your spouse signed a prenuptual agreement that specifically addresses the business you own, then the course of events has already been set. Obviously, if you didn’t sign a prenup, you can’t go back in time to rectify that mistake, but if you did sign one, you are in a much better position. A business can be quite a lucrative asset, which will make it a main focus during divorce proceedings.

Protecting Your Business During a Divorce: Who is the Major “Player” in the Business

One of the factors that the courts will consider during your divorce is each spouse’s role in the business. Do each of you contribute equally to the business, or is it operated mainly by you or your spouse? If you are the one who handles all of the business matters, then you stand to gain possession of the business. You might still have to divide assets that accrued during the marriage, but at least you won’t have to dissolve and start fresh. If, however, the business operation was split 50/50, you will have to compromise in order to gain any ownership over the business at all.

Protecting Your Business During a Divorce: Was the Business Started During the Marriage?

This is another major factor. If you started the business before you were married, and continued to run the business throughout your marriage, then you stand a better chance of retaining ownership over your company. If, however, you started the business after you got married, the situation becomes more complicated. In divorce, you separate “community property” – that is, what you and your spouse own together. If you started the business after getting married – even if you are the only one who runs the business – you and your spouse are technically co-owners.

Protecting Your Business During a Divorce: Does Your Spouse Want the Business?

In some cases, one spouse will want nothing to do with the business after the divorce, which works in your favor. You might still have to part with half of the assets, but at least you will continue to own your business. As difficult as it might be, you should talk with your soon-to-be-ex and find out what his or her plans are concerning the business. The more you can sort out before heading off to court, the better.

Protecting Your Business During a Divorce: Be Prepared to Establish Your Case

Any documentation that you can provide the courts will help your case considerably. You must be able to demonstrate your involvement in the business, and if possible, your spouse’s non-involvement. Just like with other community property disputes, the spouse who “used it” the most has the better chance of retaining it. For example, can you show correspondence between your self and colleagues, vendors and customers that demonstrates your relationship with them? What about paycheck stubs for employees that shows you sign their checks? Purchase orders with your signature, service invoices with your name at the top and other documentation will greatly improve your chances of protecting your business during a divorce.

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