Any marital asset is generally subject to division during divorce. If one spouse is a business owner, this can mean the business is subject to division in the event of a divorce.
Can a business owner protect the business? Entrepreneurs can take proactive steps to better ensure the business survives the divorce. Four examples include:
- Organize paperwork. Gather copies of business accounts. Ideally, this will show business accounts that are distinct from personal accounts. It is best if family finances were kept separate from business finances. If not, avoid any future borrowing from family accounts to fund business expenditures. Keep these as separate as possible. This can help to keep the business separated from the divorce proceedings.
- Get a valuation of the business. You are more likely to get a fair division of property if you get a proper valuation. When it comes to business interests, it is often wise to get a neutral, third party to complete the valuation.
- Remove the spouse. As noted in a recent piece by Entrepreneur, it is important to remove the spouse from business operations. If he or she has a prominent role in the business, your future ex will be able to use this position to negotiate a stronger case for his or her interests in your business. In some cases, it is best to ease the spouse out of this position to preserve your business interests.
- Negotiate. It is wise to prepare to negotiate the distribution of another piece of property. Perhaps your spouse is fond of a vacation property or valuable pieces of jewelry. Consider negotiating an exchange of similarly valued property to maintain the business.
A failure to properly plan for business interests before negotiating the property division determination portion of the divorce proceeding could result in the need to sell business interests or result in a spouse that the court deems a business partner. The four steps noted above can help mitigate these risks, but it is advisable to seek legal counsel to better ensure your business interests are protected.