Whether you inherited a family business that you want to keep in the family or you do not want your soon-to-be-ex-spouse to get any share of the entity you worked so hard to build up, it is important that you take steps sooner rather than later to protect your business. The longer you wait, the more difficult it will become to protect your livelihood.
Inc. shares the top ways to protect your interest in your business regardless of what happens to your marriage. Many of these methods are most effective when you take them long before your marriage ends, but there are a few that can help you even after you and your spouse decide to part ways.
Put protections in place before divorce becomes a consideration
Per Inc., the best protective methods are only effective if you put them in place long before the thought of divorce crosses either your or your spouse’s minds. If divorce is already on the table, attempting to protect your business via any of the following means could result in fraud charges.
- Prenuptial or premarital agreement
- Shareholder, partnership and/or operating agreements
- Buy-sell agreements
Inc. also recommends that you pay yourself an aggressive salary. If you reinvest everything you earn back into the business, your spouse may assert that the law entitles him or her to a greater share of your business and/or more money post-divorce because he or she never derived any of its benefits during your marriage. It also recommends that you think twice before involving your spouse in business operations.
Buy out your spouse
Unfortunately, many business owners fail to consider the consequences of divorce on their operations until it is too late. If this is the case with you, you may still have a few options for protecting your livelihood. For example, you may agree to give your spouse a greater share of your marital funds and property to make up for what he or she will no longer gain from the business.
A lawyer may also recommend a property settlement note. A settlement note is a long-term payout, with interest, of the amount you owe your spouse for the value of his or her share of the business. Finally, and though the last resort option, a judge may recommend selling your business and dividing up the profit between you two. A lawyer who has experience with high-asset divorces can help you explore your options and identify one that is both beneficial and likely to receive a judge’s approval.