Divorce can sometimes be a negative experience. The entire process can put a lot of stress on all parties involved. Unfortunately, the process isn’t always amicable — especially when there’s money involved. If you are a business owner going through a divorce, there are several issues you need to take into consideration.
Depending on the state in which you reside, many rules may have an impact on your business. You should seek out an experienced attorney to help you protect your interests and guide you through the process.
How Does Divorce Affect Your Business?
Divorce can put you in a precarious situation. You could very well end up having to give up half of your business if your state recognizes community property. You should take the necessary steps to head this off if you don’t want to lose your business.
Instead of giving up your business, see if retaining other assets of equitable value in place of giving up a share of your business. Items such as your house, cars, stocks, and other valuables may be acceptable. You could give up an extra share of those assets protecting your ownership of the business.
In some cases, the courts may allow you to liquidate your assets and split the proceeds. Sometimes courts frown on this if the business is supporting the family’s lifestyle. There are cases when this may be the only solution.
Ways To Protect Your Business in Advance
There are ways you can head off certain actions by taking preemptive steps. The following strategies can save you from headaches down the road:
- Prenuptial Agreement: Get the prenuptial agreement because there is a chance that it can save your business. When the agreement is established, make sure the business is designated as separate property. You and your spouse must agree on these conditions. The signing of the documents must be done in front of witnesses and fully signed voluntarily by your future spouse. The court will deem the agreement null and void if it was signed under coercion.
- Postnuptial Agreement: The postnuptial works just like a prenuptial, but it is prepared after the marriage. This condition is carefully scrutinized by the courts, and they are not always upheld. But if you did not sign a prenuptial agreement, it is worth considering.
- Buy-Sell Agreement: This can be an important tool if your spouse dies or if the business is sold. A tax lawyer with experience in contracts can supply you with more information.
- Salary: Take a salary for yourself to ensure you can reinvest it. If you put a large amount back into the business rather than paying yourself, you could lose that money as part of the valuation of the business.
- Establish a Trust: Consider removing the business as a marital asset and put it into a trust.
- Separate Expenses: Separate your personal and business expenses so it remains separate.
- Accounting: Hiring a forensic accountant is also a good idea when you need to scrutinize the finances. If the business was created before your marriage, divorce may not impact it. However, there are times when the “separate property” status is lost during marriage.
- Research: It is also important to do your own research about how divorce can affect your business. Never allow yourself to be caught flat-footed when you need to arm yourself with information. It can make a big difference.
Unfortunately, in most instances, divorce and business do not always mix. There are many occasions when it ends in bitterness and acrimony. Take the necessary steps before the marriage to secure your assets.
How Divorce Affects Women Business Owners
While going through a divorce can be very stressful for anyone, it can be particularly hard on women who own businesses. The pressures already associated with divorce like child custody, distribution of assets, and other disruptions can be particularly overwhelming. The sad reality is that you may end up having to share all of your hard work with little recourse.
If your spouse has had a hand in helping the business, this may not be an issue for you. In fact, you may want to have a share. On the other hand, if you have held the lion share of the responsibility in building the business, this may be a point of contention.
You will need to speak with a qualified divorce attorney to help you understand your options. At the very least you will understand how to position yourself regardless of the outcome.
The reality is that some women may not understand that their spouse may be entitled to more than they believe. A false sense of security can make them believe certain things that may not be true. If certain agreements are not put in place in a prenuptial or postnuptial agreement, the courts will have the final say.
Key Strategies That Can Lead to Success
You need to have the right mindset when you go into court. Make sure you can demonstrate how your family lifestyle, gender gap, and household work plays a vital role. In fact, research from the Institute for Women’s Policy Research shows how the gap in duties play a significant role.
Women have a strong argument when it comes to distribution of assets. Do your best in explaining how your unpaid work impacts the family and how it can impact your business value. A strong argument can be made that women go above and beyond when it comes to unpaid financial responsibilities and therefore are entitled to larger portion.
The following is a list of other things you may need to understand the challenges of owning a business:
- More than one business valuation method can be used to produce a variety of results.
- The best route to go when dividing the business is not the same for all people. Let your lawyer negotiate what is best.
- There can be a lot of difficulty when determining how much marital property can be divided.
- Factors like parenting time, spousal support, and more can impact a business owner during divorce.
- When business assets are at the heart of a divorce, it usually has more to do with money and negotiation that laws.
- The issue can be quite complex. You and your spouse should work out the details.
If you are a business owner, find out your rights. This can be a very tricky part dividing assets during a divorce. Not all laws per state are the same. You will need to find a competent divorce attorney who is steeped in contractual and business law to advise you. There are many things that can affect your ownership and how it falls under community property.