If you intend to file for divorce or if your spouse is thinking of getting divorced, you are going to worry about the business you own because let’s be honest, divorces can be costly and it may affect your business income. How does divorce affect the ownership and running of your business and can you protect it ahead of time? These are all questions that should be answered. What if you work with your spouse and suddenly you are concerned about the future of your business? If you are in business together, things can change quickly.
Giving up half of your business could mean that other assets can be paid to your ex. If you own assets including a house, cars, stocks, bank and retirement funds this will be included. If your spouse contributed to your business and has assets themselves then the business is marital property. If the business was formed during the marriage, it is also marital propertyYou should get all the information you need regarding your divorce from a professional business. You may need to look at divorce lawyers. They will be able to talk you through all the proceedings and this must be looked into before any decisions are made.
There are ways to protect your business beforehand if you want to:
- Get a prenuptial agreement – this will solve a lot of issues and whilst this isn’t guaranteed to save a business, it will most likely heavily contribute to it. You must designate any future businesses as separate property and you must always be honest about all assets and finances. Without this, it will be very difficult to fully get a good agreement and these things tend to come back to bite you. Honesty is vital. The agreement must be in writing and signed in the presence of witnesses or a notary also.
- Postnuptial agreement – A postnup is an agreement is very similar to a prenup but it occurs after the marriage. These can be a little difficult sometimes and will take a lot of scrutinising by lawyers because there are times when they will be signing their rights away.
While your business may be under the microscope as parts of the legal proceedings, you will need to have access to all records. This includes financial records, shareholder agreements, and tax returns and any other documents that will assist with your claims. Even if you have a business that has been around for years, you must still provide all of the information required.
What are the best options
Every circumstance is different and will require different things as time goes on but there are some outcomes that will either be positive or negative but these will need to be discussed as a family. You will need to find the right solutions.
Selling Your Company
If you can not negotiate and can’t come up with any type of binding agreement then it may come down to selling the business to a third party and then sharing the sales. Unfortunately this will result in the income stream being demolished entirely. This will be difficult if you have a family and you want to remain in business for financial purposes. However this may be the only option.
Continue Co-Ownership And Make It Work
In some cases, it may be possible to continue operating your business together. You may be in a financial position to sell or perhaps your business is worth more to you as individuals. In that case, you will probably want to see the business continue. This may be because it is a lifelong family business and for the sake of partnerships already in place or others who may be employed in the family business you may want to look at co ownership.
Divide the Business
If both divorcing spouses have a strong desire to still work within the business, one option is to split the business into two separate entities which means that it is halved, essentially. The chances are both spouses will have different roles within the company and therefore can make it work. It may be difficult if you have staff working for you but if the business has multiple divisions or business units, they most likely could be run separately.
Divorce should not affect our minds and our mental health. Our businesses should not have to feel the burden of this on top of the stress of divorce. It’s important to have finances on the side for these types of issues that arise, as well as having the conversations about business assets at the beginning.