Divorce and Your Business: Preparing for the Unthinkable
So, you’ve built the perfect life. You have a spouse and children. You own a home. And you have been successfully operating your own small business for some time now.
When people marry they don’t intend to divorce. However, the truth is 40-50% of all marriages in the United States end in divorce.
And, as if divorce weren’t trying enough, things only get more complicated when you and your spouse own a business.
As a business owner, being prepared for divorce is not a bad thing. It is not telling of what will happen in the future. Nor does it indicate that you love your spouse any less than you should. And it definitely does not make you a bad person.
In fact, protecting your business from a potential divorce is one of the best things you can do for yourself. Plus, it is just a smart business move.
Read on to learn two important ways you can prepare for a divorce. These tips will stand you in good stead even if you and your spouse were to divorce years into your marriage and long after your business has become a success.
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1. Keep It Separated
Though this can be difficult, especially if you and your spouse opened up shop together, try your best to keep family matters and business matters separate. After all, business property that is shared and intermingled with your family, your spouse included, can be considered relationship property during divorce proceedings. This means you could lose half of your business in a divorce.
One great way to help prevent this, especially if you started your business before the marriage, is to have a prenuptial agreement in place. In this way, both parties know ahead of time what to expect.
If you have a prenuptial agreement in place, make sure it meets the following conditions:
- It is in writing and signed by all involved parties
- Each party receives independent legal advice pertaining to the agreement
- The document has been signed in the presence of an attorney
Keep in mind that it is crucial to get the help of an experienced law firm, such as Romano Law, P.C., while setting up a prenuptial agreement. The same goes for those times when you are facing divorce.
This is because if at any time during your divorce proceeding the overseeing judge feels the prenuptial agreement was created as an injustice to one party it can be overturned.
Understanding the complex nature of divorces that involve family-owned businesses, the right divorce attorney can help you get what you deserve and defend you against unsavory exes out to cause unnecessary problems.
2. Create a Trust
Typically, when people are divorced, regardless of the state they reside in, all property and assets are split 50/50, unless there is a pre- or postnuptial agreement in place.
That said, you can protect your business from falling victim to the 50/50 rule if you place it in a family trust. This is because once you transfer your business to a family trust, it can no longer be considered “relationship property.” Now, it officially belongs to only you.
With a family trust you can allocate yourself or your children as beneficiaries. This will prevent your losing your business to your spouse. This is especially important if you had your business in place before marriage. Further, it can save you the hassle of fighting it out in court.
Having an experienced family trust attorney to help you with this is critical. However, keep in mind that you cannot establish a family trust in hopes of cheating a spouse out of property or assets that they are legally entitled to.
Take Steps to Protect Your Interests
In the end, protecting your business from divorce can be challenging. This is especially true if you don’t take proactive measures before you or your spouse file the divorce petition. Luckily, with the help of a knowledgeable attorney, such as Michael Romano of Romano Law, P.C., you can receive all the legal counsel you need. Good legal advice will protect your assets, including your business.