How to Guard Your Business in Divorce

Divorce is, without a doubt, one of the most devastating experiences in the life of any married couple. People get married with the high hope of staying happily ever after. That it is only death that could separate them. But beyond hope lies the reality and the sad reality is that over 50 percent of fresh marriages end up in divorce. The figures are even much greater for the second and third marriages which stand at above 70 percent.

The emotional destruction and pain presented by divorce can be heightened to an unimaginable extent if one or both the spouses have a business. Not only are you dealing with the splitting of assets, and the options of sole or joint child custody if you have children, it could be even worse if the husband and wife are involved in a joint business: Who would wish to end up with their ex as their business partners?

How Divorce Can Affect Your Business

Beyond the financial challenges, emotional pain that often presents itself in divorce can be overwhelming and easily throw the partner off balance. This could affect their interest and performance in the business.

In many jurisdictions, any property gotten during the marriage is taken as marital property notwithstanding which spouse owns it. And because not many divorcing couples would want to continue as business partners thereafter, the result is often that of giving up half of the investment to the other spouse. This can be a big loss if it is only one spouse of spent all his or her time, effort and finances to make the business successful.

In some cases, divorce could lead to a total liquidation of the business assets and splitting of the proceeds with your ex-wife or ex-husband.

Another possible challenge in divorce is that one of the affected spouses may opt to "punish" the other by convincing all the loyal customers to sabotage the business. What if they decide to hire goons to break into the business and damage the property? This can end up in the death of the business. These are unfortunate possibilities that no any married couple would wish to experience. Not after divorce.

However, there are several ways in which you can protect your business to avoid such losses in the unfortunate event of divorce. These are the five ways to simplify your divorce.

  1. 1. Have clear Prenuptial and Postnuptial agreements.
A prenuptial agreement a signed contract by both spouses before their marriage. It clearly stipulates the property rights of each one of them while in marriage and what they should expect or claim if they choose to divorce. This can be a very strong protector of your business as the courts will always respect it.

A postnuptial agreement, on the other hand, is a pact entered into by both spouses after marriage. However, it contains all the elements in the prenuptial agreements.

  1. 2. Register your business as a partnership, limited company or Shareholder.
With your business as a partnership or Shareholder, you should be able to put provisions aimed at protecting the interests of the owners even divorce comes up. For example, a provision that no shares can be transferred without the approval of the other partner(s) or shareholders can insulate your business even at divorce. Visit SBA.gov to help determine the business structure you should choose.

  1. 3. If possible, do not involve your spouse in your business.
In most jurisdictions, all or the greater part of your property will be marked as marital property. If your spouse was an employee of your business or contributed resources or ideas during your marriage, then she or he will have a considerable claim of shares in the business.

  1. 4. Pay yourself handsomely.
It can be very painful for you if plow back all the profits into the business only to end up losing a larger percentage of the business shares to your ex-spouse. It will always be a plausible claim by the ex-spouse that she or he did not benefit from the business while you were still married as you reinvested everything back into the business. To cushion yourself again such heartache, Pay yourself well before things get out of hand.

  1. 5. Be smart in paying off your ex- spouse
In the event that all the precautions did not work and it gets to the point that you have to pay off your ex-spouse then you have to be smart. One of the ways is to use your share from other marital assets to pay him or her her claim. This will leave your business intact. Alternatively, you can use Property Settlement note which is a long term payout plan. This will least hurt your business.

Divorce is often a heartbreaking experience which can get even more devastating if it interferes with one of the spouses' only investment. It is important to have necessary measures in place to guard your business if divorce becomes inevitable.

Author:.

I am interested in writing on varied topics.

Go Deeper | Website

Want More?

 
New Graphic
Subscriber Counter